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Episode 3: The story so far, part 2
88 Plays1 year ago
Why does the state protect renters with one hand and prevent cities from protecting them more with the other? Why did a labor leader argue against an (ostensible) labor protection standard? Join us as we bring you up to the present (the end of 2023) with the housing-on-commercial-strips law (AB 2011), the more-affordable-housing-in-scofflaw-cities law (SB 423), and jumping back a bit, the first statewide tenant protection law (AB 1482), and the many, many issues these raise.
My guest once again is Scott Simmons, whose dating podcast Wish You All The Best you should still check out.
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Transcript
00:00:01
Speaker
Hello, and welcome to John Nerds Out on Housing Legislation. I'm John Minot, and this is episode three, The Story So Far, part two. I am joined once again by my friend Scott Simmons. Hello, hello. As we get up to date in readiness for the legislative session,
00:00:25
Speaker
As we discovered last episode, there is a lot going on and it is difficult to cover quickly, but we did most of it. And some of the dramas of just the last 12 months are going to be pretty important background, maybe not for this year, but for whatever happens next. So I want to give them some of the time they deserve. Let's do it. I'm excited.
00:00:55
Speaker
Before I go to the really recent stuff, I want to go back to something I missed last time, which I think is pretty important, and that is the strides that have been made on tenant protections, because that is also an important category. As I mentioned in my first episode, it's something that does not in itself make housing more abundant, but it protects people in need right now, and it makes the overall housing market fairer.
00:01:24
Speaker
which we tend to think is a prerequisite to, we think it's important. Yeah, absolutely. I mean, can we go down a small rabbit hole on tenant protections real quick? Yeah.
00:01:37
Speaker
Yeah, I would say, you know, I think a lot of times when people talk about houses or think about houses, one of the folks who don't know us or folks who uncharitably are aware of pro-housing folks will often say that the things that we are working towards hurt current, you know, at-risk tenants, right? A lot of times, even in activism sometimes, it can be difficult to get
00:02:04
Speaker
uh, tenant groups to the table to talk about, um, doing work together. That's been my experience maybe recently up in the Bay Area that's been changing, but there is kind of a tension or there's a, like a perceived tension that I think turns into a real tension between housing and, and
00:02:23
Speaker
tenant activism that, you know, my two cents, I don't think should be there. And I do think that the tenant protections are really aligned perfectly with the goals of a lot of housing. And I would also include transportation activism.
00:02:40
Speaker
uh because you're trying to figure out how to both in the short term and in the long term allow people to live in communities stay where they are close to their people and be where they're you know live close to opportunity and live good lives um and i think all that all that all of it all of that is connected right um and for me i think a lot of the tenant protections really ensure that the folks who are
00:03:08
Speaker
most at risk in the short term are able to achieve those goals as we work towards longer term goals of housing abundance, which simply by nature of the process and by nature of how long it takes to build stuff is going to be not as much of a short term goal. Does that make sense? Are you kind of on the same page there? Yeah, absolutely. And I think it gets to a more philosophical
00:03:34
Speaker
sense I have of what the pro-housing movement is and how it can be misunderstood. I think a common shortcut people take is to think of people as pro-business or anti-business, pro-regulation or anti-regulation. Totally. And when you're talking about how bad certain regulations zoning are, and when you're looking to the possibility of private development toward housing abundance,
00:04:04
Speaker
People can take that as shorthand for you are the pro-business faction or you are the anti-regulation faction. And in fact, the way I see it, it is a matter of if you believe in regulation, in the potential of government to make things better, you need to be ready for the possibility that regulations can also hurt.
00:04:31
Speaker
that throwing out the bad ones is not the same as rejecting them wholesale as being a libertarian. That's why I think it's very possible to support tenant protections and support dismantling zoning and see those as working together because you're making the regulations work for people. You're testing everything and holding on to the good.
00:04:58
Speaker
Yeah, and it really I mean, even here, even in the first, what is this three minutes or five minutes of the thing, it really is easy to get in the weeds fast on this stuff. And I think it's one of the reasons that one of the reasons that I'm always grateful to have you around and folks like you around to kind of unravel this stuff, because I mean, even if you're somebody who cares about it, it really can get weeds and just like to arcane very quickly. And but, you know,
00:05:25
Speaker
because it sort of needs to, right? These are important issues and, you know, one type of rule doesn't apply everywhere. Well, anyway, I'm going down a rabbit hole there. But yeah, I wanted to kind of double click on the tenant protections thing. This headset is an important piece of the puzzle here, for sure.
00:05:44
Speaker
Yeah, and to put meat on the bones of the importance of that cause, the tenant protection bill I want to talk about is something where the pro-housing movement was by and large part of the coalition supporting it. Awesome. So this is what was called the Tenant Protection Act of 2019. And it is still often known by its number, which is AB 1482.
00:06:09
Speaker
And this was in the first year of Gavin Newsom's governorship, but it was something that a lot of people had been seeking for a while. And it was a form of statewide rent control, of reducing how much rent could increase year by year within certain limits. Now, we have several cities in California have a level of rent control, but it is really just the biggest cities, although it's growing.
00:06:39
Speaker
And usually that is something along the lines of just inflation or just inflation times a factor and inflation being the consumer price index, which is often two, three, 4%. Recently it was higher, but very briefly. And those kinds of policies are controversial. A lot of interests fight against them.
00:07:04
Speaker
And it's important to note that the state level bill was passable in that it was not quite that. It was meant to guard against absurd rent increases, which they ended up defining as inflation plus five points.
00:07:25
Speaker
So if inflation is 2%, then under AB 1482, then your rent can grow by 7%. If inflation is 4%, it can grow by 9%. And the absolute cap it can be is 10%, which it did hit recently.
00:07:41
Speaker
Oh, wow. So just to kind of take a step back for my very sweet mom who might listen to this, when we're talking about rent control and these percentages, we're talking about the percent that a landlord can increase your rent one year after your lease began.
00:07:59
Speaker
So, this is a way of making sure that when you rent a place, the rising value of the rental market around you doesn't increase dramatically and cost a whole bunch more and mean that you have to move because your job hasn't given you a 10% raise every year, that kind of thing. So the idea is to keep your housing costs under control.
00:08:24
Speaker
Yeah, so if you start out at $1,000 a month and there's a limitation to 5%, then the next year the landlord can raise your rent to no more than $1,050.
00:08:36
Speaker
We'll raise it no more than $50, so your rent will be. Yeah, two. Yeah, buy no more than $50, two no more than $1,050, yes. Yeah, yeah. Okay, so this new AB 1048? 1482. Sorry, AB 1482. Edit that out. Edit out the part where I forget the name. No, I'm kidding. What high level, 10,000 foot view, what just created rent control where it didn't exist before, or what did it do?
00:09:05
Speaker
Yes, it created the shorthand at the time was rent cap, which doesn't really mean anything different. But in practice, it meant that people were starting to get, even if they didn't necessarily believe in rent control, they were getting morally outraged at hearing about people's rent growing in just one year by 15, 20, 25%. They said, okay, even if we don't want to limit rent increases year to year too much,
00:09:33
Speaker
We can agree that it's unconscionable to raise rent by more than, let's say, 10%. Okay. So that was the consensus at the time. And Gavin Newsom, as I recall, did actually come in at the end and throw his weight around for it, which not everyone expected. Wow. Yeah. And it does also create extra protections like just cause eviction, like
00:10:03
Speaker
Because if the landlord could evict you for any reason, then this would be unenforceable. Right, because they could just evict you when they wanted to raise the rent. Because then if the law says that I can't raise the rent, then they say, OK, I want to raise the rent by 10%. And the tenant says, no, I know my rights. Then the landlord could just say, OK, you're evicted, and I don't have to say why.
00:10:29
Speaker
Right. OK, so because of this bill, landlords, landlords now have to show cause if they want to evict a tenant. Yes. And there is there is some cap on the total amount that can be increased, which I guess we're not calling rent control. It's a rent cap because rent control has a bad PR by now or something. I don't know. Yes, sure. I'll change the name and get the same thing. But there are some big exceptions to be clear.
00:10:59
Speaker
Yeah. It does not apply to housing that was built within the past 15 years. The idea is that when new housing is built, that to pay off that investment and make sure that there is an incentive to build the housing, that the new landlord is not constrained in what they can do. But then once it turns 15, it's starting to age. It's starting to turn into maybe more middle income housing if things are going well.
00:11:27
Speaker
and then it makes more sense. It's almost like from a class point of view that they don't want to raise, they don't want to give too many protections to people who are living in presumably more expensive housing. Sure, yeah. But there is a market argument for it. And choosing the last 15 years is actually
00:11:49
Speaker
an advance on what a lot of cities have, even San Francisco, because of Costa Hawkins, which I'm going to get into completely separately. OK, OK. I want to keep things separate. It does not apply to single family homes unless they are owned by corporations. OK, sure. And single family homes also includes individually owned condos.
00:12:18
Speaker
OK, so if I'm if I bought my starter condo and then moved into a single family home and I'm renting that condo out, I can raise the rent on that condo as much as I want. Yeah. And there are a number of other exceptions. There's definitely a lot of room for improvement on it. Sure. Hey, but progress is progress. Progress is progress. Yes, exactly. Yeah. Now, there's.
00:12:42
Speaker
This opened up essentially a new front of tenant protections because the old front was fighting for it at the city level. But at the city level, getting rent protections passed by cities is really constrained by another state law that is still on the books that goes back to 1995. And that is what you hear of as Costa Hawkins, named after the two legislators who passed it.
00:13:12
Speaker
And Costa Hawkins was 1995. That was a very different time in California. That was a time when we were sort of at a libertarian apex. And the bipartisan consensus in the legislature at that time was essentially rent control is a bad idea, and we should keep it from growing anywhere it doesn't already exist, and we should phase it out over time. Right, sure.
00:13:41
Speaker
The big way they implemented that was to say, rent control cannot apply to any housing built after 1995. In some cities, it's different, but set that aside. In most cities, it's 1995.
00:14:00
Speaker
So basically setting the law, picking a date, and then as time rolls forward, the amount of housing stock that will be exempt will increase because the further in the past 1995 is, the more stuff out there has been built. Yes. Theoretically. As written, that would eventually make rent control obsolete because there would be almost no housing left that was subject to it. Yeah. Well, right. Eventually. Yeah. Eventually, yes.
00:14:25
Speaker
But so that's why I said earlier that making it a 15 year rolling date actually brings some housing under protection that San Francisco could not legally protect. San Francisco can only protect decades old housing, but this state law protects housing now built as recently as 2009.
00:14:46
Speaker
Oh, wow. So if something built between 2009 and 95 would not have been able to have rent control previously, but now after 2019, it does. That's cool. That's good. But it didn't change that state law. So it didn't let cities pass anything more. And as for that reason, that is still a battle line. So when you've heard in the last few years about rent control initiatives,
00:15:16
Speaker
at the state level that you actually had to vote on, that has never been imposing rent control at the state level. It has always been repeal Costa Hawkins and let cities pass whatever rent control they want. Interesting. Yeah. Which can be a little hard sell because it's a little complicated. Right. And those have not succeeded to date.
00:15:42
Speaker
So there's a lot of dimensions to rent control. There's what can you achieve at the state level? And there's what should cities be allowed to do with their own local authority and their own judgment of the situation on the ground? Sure. And the status quo is that cities can't do a lot, unfortunately. What would happen if we did repeal Costa Hawkins?
00:16:07
Speaker
A few cities would start to tighten their rent control, probably not many, probably just the most progressive ones. They would probably still put 15 to 20 year rolling dates. Berkeley actually passed an ordinance of what they wanted rent control to look like if Costa Hawkins were repealed. And they ended up with a 20 year rolling date.
00:16:32
Speaker
OK. And there is also the backstop that if you if you control rent too harshly, you are actually going to get sued in federal court. Oh, interesting. And that's another reason that you have the inflation. The inflation caps is that generally, if you if you just keep rents flat, if you say simply no one could increase rent
00:17:02
Speaker
A federal judge is very likely to say this violates the owner's right to a fair rate of return on their investment. And don't bother looking for that in the Constitution. It's not there. It is implied that the federal courts believe it's a right. And so there used to be a lot of sparring on these grounds before Costa Hawkins over what exactly cities could pass.
00:17:26
Speaker
OK, but they could certainly control more recent housing and and at lower annual rates of increase. And I would guess that the factions that are put pushing for Costa Hawkins repeal are the tenants organizations. And I would guess the factions pushing against it are basically landlords. Yeah, landlords, the big business, the California Chamber of Commerce realtors. Yeah.
00:17:56
Speaker
real estate investment trusts, those kinds of big organizations that are making money off of rent. Realtors, wait, why realtors? Oh, because it protects the rate of return on a purchase property. Part of the value of a home is the amount of rent you can wring out of it, even if you aren't renting it out right now. Got it.
00:18:21
Speaker
So there have actually been some improvements to 1482 attempts to attempts to bring the cap down because 10 percent was noticeable recently. Attempts to make lower increases, but also to make it easier to enforce. Right now, there's there's some difficulty in enforcing it in court. It's not as easy as some other rights people have. Hmm.
00:18:48
Speaker
The just causes could be limited, perhaps. Right now, there's a lot of ability for owners to do move-in evictions. What's a move-in eviction? That's when the owner says, I, or my family member, wants to move into this unit, and I have the right to do that and evict someone for it. Got it. Got it. Got it. And in some places, you can do an owner move-in eviction for your second cousin. And then they might be gone the next month.
00:19:15
Speaker
Right. Right. So a lot of stuff to figure out. Right. Right. So a lot of weird little loopholes and edge cases and like ways that landlords can still sort of be shady if they want to be. Yeah. Got it. But yeah, there is definitely more to do on tenant protections, but that's where I'll leave it for now. Yeah. Okay. Good stuff. Okay.
00:19:35
Speaker
OK, so the big other bills I want to talk about to bring us up to date, what really brings us up to date is not that we're upzoning more, although we are. And upzoning again is forcing cities to allow higher density than their current zoning says. Yeah, we are doing that. But what has really been illuminated in the last couple of years is the union question.
00:20:04
Speaker
The question of if you were going to build a lot more housing, who's going to build it and will they be union workers? And it's interestingly complicated because most construction labor in the state is not unionized, probably like 90%. But the unions are still important and they are still very politically powerful.
00:20:31
Speaker
Sure. Yeah. They tend to focus more on big projects. Public works, stadiums, big apartment buildings sometimes, commercial buildings. Okay. But a lot of the non-unionized are immigrants are often undocumented. Right. Or difficult to unionize. Right, right, right.
00:20:54
Speaker
So as we started to get to more ambitious upzoning bills, as the legislators started to be one over to this cause, something union started to demand was what they called skilled and trained provisions. And that is shorthand for a complicated requirement about the qualifications of workers on the projects.
00:21:18
Speaker
Okay. And what it boils down to is you are not going to meet those qualifications unless you are unionized. In fact, not even all your union members will meet those standards. Oh, wow. Well, so hang on. Wait a second. If I'm a union activist, if I'm somebody in Sacramento trying to make sure that California laws are good for unions, why wouldn't I just say you have to use union members to build these projects? Why would I create these like requirements?
00:21:49
Speaker
I think it is the most implementable way. I think there could be some legal issues if you literally say they have to be a member of a union. I haven't actually thought of that, but I think that it is a relatively neutral way to achieve that effect. Okay. But effectively, what these people are saying is you've got to use union workers. Okay. Yeah, that's right.
00:22:15
Speaker
The number was AB 2011, and it was submitted by our very own Buffy Wicks from Berkeley. Woo-hoo. And it was called the Affordable Housing and High Road. What was it?
00:22:28
Speaker
Buffy Wicks, a very awesome legislator, famously, I think was immersing her child during a critical vote in 2020? I forget when. Yes, she was actually forced to travel to Sacramento while immersing her child for a critical vote, which she had thought she wouldn't have to be present for. Okay, it is called the Affordable Housing and High Road Jobs Act. Okay.
00:22:55
Speaker
The concept was we have all of these commercial strips in California that have a lot of existing jobs that have a lot of commerce and transportation. And often they are underused. Often the malls are dying. Often you have all these shopping centers that could be better used. And so the question goes, why not build housing there? OK.
00:23:21
Speaker
There are, after all, there are probably more services around there. There's some public transportation, depending where you are. And it allowed, contrary to a city zoning, it allowed building up several stories for fairly dense housing, 30 to 80 units per acre, as long as it was
00:23:46
Speaker
on a road that was not an interstate that was between 70 and 150 feet wide. And it was in a commercial area. Okay. Okay. Okay. So if you're in a part of some town and a lot of California is suburbs, right? So if you're on some part of the suburb, there's a big old road and it used to be a bunch of shops, maybe a mall, you can now
00:24:09
Speaker
put relatively dense, I mean, not like a high rise, but you can put like a three, four story kind of set of buildings there and people can call it home. Yeah. That sounds like a big win. I like that. It was pretty persuasive, but as it was coursing its way through, the state building and construction trades council
00:24:37
Speaker
was lobbying very hard against it. Or specifically, they wanted the amendment that it would have a skilled and trained provision, that you could not take advantage of this special provision of law to build this new housing unless your project also had union labor. And what had been noticed over the years, there are some places where this standard exists.
00:25:07
Speaker
And these skilled and trained workers are pretty thin on the ground, especially outside of the major urban areas. And even in there, they tend to be in high demand. They're quite skilled. There's projects that need them, projects that have already been unionized. And yeah, they're expensive, and they take a long time to find. Yeah. OK. Can we go down a rabbit hole about unions here?
00:25:38
Speaker
I like unions. I'm a fan of unions. Lefty McLefty pants over here. You know what I like? Weekends. You have to thank for weekends. Frickin unions, right? Yes. I'm a fan. Let's get them keep working. If we get to a four-day work week, it's going to be because of unions. Man, am I ready for a four-day work week. With the housing stuff, and correct me where I'm wrong here because I'm sure I don't have the full picture, but with the housing stuff,
00:26:04
Speaker
the big difficulty with unions or the big difficulty with like just finding the folks who can build this stuff in general is like in this state, it's been so hard to build housing that like it doesn't make sense for California to have a big pool of skilled labor who can construct homes because most of them would have been out of work for the past whatever 40 years, right? Like the rate at which we have been building housing
00:26:33
Speaker
It's pretty low grand scheme of things. So like, yeah, not so much over the last 40 years, but but there was a huge wave of retirements in the Great Recession. OK, you know, 2008 to 2015 and the workforce shrunk by like a third. OK, and in that time, it's not like there was a whole bunch of opportunity for building new stuff because building new stuff is hard here. And so, you know, it's kind of a chicken and egg thing, right? Like it's hard to tell the unions, hey,
00:27:03
Speaker
train up a whole bunch more, I don't know, electricians, carpenters. Building these things is so much more complicated than I understand. But there's a lot of skilled folks who have to be able to do the thing, and you got to train those people. They got to actually learn. You need people that are interested in doing it and who feel like there is a career if they learn that skill. And given how tenuous and
00:27:29
Speaker
You know, no one knows for sure if in 10 years we're going to be building a whole much more housing, regardless of whether or not nerds like you and me say we should.
00:27:37
Speaker
There's no guarantee that that's going to happen. So if you told me, hey, Scott, come learn this cool, important trade, there's a chance that that might be a good career path in 10 years. I probably would say no. I would be like, no, thank you. You know what I mean? So this issue of like, and I definitely don't want to villainize the unions here. Again, I love unions. But it seems in Sacramento like these folks are doing
00:28:05
Speaker
Well, you know, the activists who are pushing on legislation for unions are doing it sounds like what they're supposed to do, which is make more demand for union labor. Right. And given that it's been so thin because of the just slow rate of construction that I have a lot of empathy for that perspective. Right. Yeah. But the other side of that is that like if Buffy Wicks is going to say, hey, I want to build a whole bunch of buildings, three, four story places for folks to have their starter condo or whatever.
00:28:35
Speaker
on these like, I don't want to call them strobes, but you know, on these like well-served a high opportunity areas, you know, there's a piece to me that gets a little cranky at the unions. Cause it's like, well, if we only use union labor to build these, we're only going to build a handful of them because there's just not, there literally just aren't enough union laborers to, to, to get it done. So I guess, a, am I framing, am I framing the status quo, uh, close to correctly in your view, and then
00:29:05
Speaker
B, if I am, what do we do about it? Yeah, you have stated it really well that this is a difficult question because you can really understand why unions would want, given so many assaults on them, they would want to know that they are going to have a place in a future abundant housing world.
00:29:33
Speaker
And yeah, I cannot fault them for negotiating for that. But I can say that I think that is counterproductive in this particular case, that we should try to encourage unions overall. We should try to make it easier for workers to unionize in every workplace, every industry. And we should do better by undocumented workers, help them get regularized, help them unionize.
00:30:02
Speaker
Yeah. And. And that they are also affected, you know, by the housing crisis, you know, they are also being pushed out into the Central Valley. Yeah, the workers themselves. Yeah. Yeah. And that at the moment to get housing kickstarted into a higher level of production,
00:30:24
Speaker
that's skilled and trained is not the right way to go. I should say AB 2011 did not have no labor protections. It did have improvements for labor standards. One was essentially to offer health insurance. And the other was to offer what's called prevailing wage, which is essentially fairly high wages, depends on the locality, depends on the trade.
00:30:51
Speaker
Okay. But it is essentially a regulated higher wage, much higher than minimum wage usually. Okay, okay, okay. But I would guess not as high as what a union member might command. Not necessarily. I'm not actually sure. I know that the prevailing wage concept and definition emerged out of labor work.
00:31:16
Speaker
It was a standard designed for certain unionized projects or certain federal projects. You know, federal projects pay prevailing wage. That's one of the official standards. I don't know the differential, but it may not be as high as that. Now to your other question of how do we move on from this point? How do we keep it from being just people telling unions, you know, sit down?
00:31:44
Speaker
And the answer turned out to be that other unions agreed with us. And the one that was in the forefront was the carpenters union. I don't know why it's them in particular. Maybe it's their leadership. Maybe it's their position. Maybe it's that they are more looking for new opportunities. Maybe they're not as happy with what they have now.
00:32:07
Speaker
But yeah, the carpenters unions came out in front and they supported 2011 without the skilled and trained provision. Wow. And back in 2022, I was actually watching a hearing and watched one of their officials. And what he said resonated with me so much, I thought it was so useful that I actually typed it up at the time. OK. This was Jay Bradshaw of the NorCal Carpenters Union.
00:32:33
Speaker
And he prefaced his statement saying, the lack of housing production for decades has led to a crisis for the working class. Folks have to move further and further away from the job centers. That's led to a transportation crisis, a childcare affordability crisis. So it's real worker issues that workers face every day rooted in the lack of housing production. When you look at what is needed overall through the state,
00:32:58
Speaker
conservatively, 2 million more housing units are needed immediately, over half of those affordable. The production is just not happening right now. There's been a bit of a debate going back and forth between these labor standards, meaning the ones in 2011, and skilled and trained labor standards. Jay Bradshaw laid out that the skilled and trained workforce was something like 5,000 to 8,000 people statewide versus 800,000 construction workers statewide.
00:33:28
Speaker
Whoa, whoa. He said a workforce and housing overall in California that's 90% non-union. The carpenters union strongly supports this bill because those workers are hyper exploited, driven into the underground economy and frankly need a raise and a lift up. As a labor organization statewide, both councils, he met North and South carpenters.
00:33:49
Speaker
We are interested in those helps help in those folks Helping themselves pull up and then it's our job as a labor organization to figure out how to organize those folks and we intend to do that So getting said the provisions get housing production going and create good high-level jobs Such that we will welcome these folks into our organization pull them out of the underground economy and
00:34:14
Speaker
And now here's the thing he said that I think came the closest to shade to the state council. He said, we are not asking for you to run our organization or create an exclusionary labor standard to do our organizing for us. We intend to take care of that part of it. His name is Jay Bradshaw. Yeah. Wow. What a hero. I mean, yeah, that that's the kind of like long term.
00:34:44
Speaker
system-wide thinking that you really hope for in your leaders. That's cool. It goes with the union tradition of elevating the whole workforce at once. Sometimes labor unions try to negotiate for just their members, and sometimes they have trouble seeing benefits come to non-members. There have been cases from time to time when there was a minimum wage and some unions wanted exceptions made because they thought it threatened what they had already negotiated.
00:35:13
Speaker
But by and large, unions fight for a higher minimum wage for everyone. So they see the need for the working class as a whole to be lifted up even when they are not the immediate beneficiaries.
00:35:27
Speaker
I think this is a solid part of that tradition. That's awesome. That's so awesome. Okay, so the Carpenters Union in 2019-ish? This is 2022. Oh, wow, recently. 2022 supports
00:35:48
Speaker
you know, basically legislation to push more housing production. And that is, and I assume other like trades or other unions were still trying to, you know, opposing it until they got concessions or that kind of thing. Well, the state council was, and the state council is, you know, a group that organizes all the unions and the carpenters, I think were, they may have been kicked out, but I think they were members of that council too.
00:36:14
Speaker
kicked out because of this? Don't quote me there. Okay. Yeah. It's like an umbrella. It's the state construction, building construction trades councils and umbrella groups. That was actually the people doing this organizing, four skilled and trained.
00:36:30
Speaker
And I want to say, like, between you and me, like you, somebody who keeps up on this stuff very closely, you know, there is also probably some level of like inside baseball happening in Sacramento, right? There's got to be there's always drama and stuff that is just like it's just impossible to know what's going on inside those rooms. Yeah.
00:36:51
Speaker
But there were a number of articles about the drama as it continued. I think the ones reporting most on it were probably CalMatters and the LA Times. Both amazing organizations, listeners, if you haven't subscribed and all that kind of stuff, go do that. OK.
00:37:10
Speaker
Okay, okay. That's all fun stuff. So that was the conflict that was set up. And I should say that the state council, the building trades had their own sort of upzoning bill at the same time countering 2011 or as the alternative. It required skilled and trained. It applied in commercials areas.
00:37:35
Speaker
It's sort of up-zoned, but it was all discretionary. They don't really have the perspective of looking for housing that is difficult for a city to deny. Anyway, I'm not gonna get into too much of that. They had their own bill. It did something similar. It had skilled and trained provisions. But it was weaker. Yes, in my opinion. Got it. Neither side backed down. And what ended up happening was it seems like everyone felt really exhausted and said,
00:38:04
Speaker
Look, let's just pass them both. And maybe one of them will be more productive than the other and maybe we'll get an idea. Okay. Interesting. That was the compromise that year in 2022. The compromise was just pass them both? Yes. Okay. How'd that go? No, they don't conflict with each other. They're just different avenues a developer could take. Well, but wait a second. If one of them is, it sounds to me like the Buffy Wicks one.
00:38:33
Speaker
would be easier. If it's less discretionary, is that wrong? I have not looked to see in what circumstances someone might want to use the other bill, SB6, when that would get you more benefit than 2011.
00:38:48
Speaker
Oh, but hey, there could be some edge case where it does, and in which case, I guess somebody would try to use that instead. Maybe, yeah. I think it was more of a result of negotiations than anything else. They were beating against each other, and someone high up, I suppose, said, look, this is silly. Let's just pass them both. They both seem OK.
00:39:11
Speaker
Okay. Okay. So wait a second. If, if, if my, if my eyes just like, you know, glossed over there from in your, from your perspective.
00:39:22
Speaker
for these two bills, do you think there's a decent chance that we're going to start seeing this kind of construction on these wide roads where you've got like a mall or a shopping center? Do you think it's going to start happening or is there something else that kind of still needs to be solved? Well, we're paying attention. It still had affordable requirements. It requires usually at least 15 percent affordable. And the trouble is they also delayed its implementation to July 2023. OK.
00:39:47
Speaker
And at that point, we had interest rates kicking in. We had some other things where a lot of projects are choking off. So I'm not sure how much has been using it. So the economy hasn't been quite right to see if it's really going to fire up. Yeah. Although I have not actually checked. There may have been in the past eight months more may have come. OK. Yeah. OK.
00:40:13
Speaker
But the negotiating result was interesting because it was not really settling the agreement. It was not deciding on a compromise between the two. It was just sort of saying, Oh, God, get me out of this room.
00:40:29
Speaker
I mean, you know, from my perspective as somebody who wants to see more housing built, I'm fine with that, right? Like giving folks more options, giving somebody who wants to build housing on some piece of land somewhere, giving them more avenues to make the paperwork say it's okay to build. That to me sounds like a good thing, right? I mean, I know that's a very crude approximation, but yeah.
00:40:56
Speaker
But the fact that that didn't really resolve the disagreement came back to bite everyone the following year in 2023. And so that brings me to SB 423. OK. So don't worry. This is the last big one. So SB 423 is the extension of SB 35. And that was the one that we talked about last time, which streamlined affordable housing.
00:41:25
Speaker
Yeah. In cities that have not built enough housing. Yeah. If you don't build enough housing for X number of years, it's going to be, somebody can just say, Hey, I'm going to use SB 35 and you can't stop them. They're going to build their affordable housing and there's not a whole lot you could do. If it's within the zoning. Yes. Yeah. So now that I've explained skilled and trade, I can circle back to SB 35 and explain a bit of a defect that turned out with SB 35. Ah, okay.
00:41:53
Speaker
So SB 35 was supposed to allow 100% affordable housing, and depending on how bad the city was at getting housing bills, as little as 10% affordable. Okay, so not a whole lot. 10% is- Yeah. Yeah, not a lot. Okay. In some cases 50, some cases 10. Okay.
00:42:14
Speaker
But even back then, at that time, and I think it was 2017, the trades came in and said, we need skilled and trained as a requirement here. For SB35? SB35. Okay, yeah. And at that time, they were a lot more powerful, frankly, and they mostly got that in. Okay.
00:42:39
Speaker
with the exception that at the end of the negotiations, SB 35 said, if you were going to build 100% affordable using this law, then you don't need skilled and trained workforce. You can use a non-union workforce. If you build anything less than 100% affordable, skilled and trained.
00:43:03
Speaker
So what happened was, because it is so expensive and so hard to find, almost all the projects using SB 35 were actually 100% affordable.
00:43:16
Speaker
Wow. Okay, wait, hold on. Zooming out a little bit from a very sweet mother who's going to listen to this. When we say a project is 10% affordable or 50% affordable or 100% affordable, we're talking about the percent of homes in the building that are basically subsidized by some mechanism or another, which is to say- They're subsidized usually by all the other ones. The 10% are subsidized by the 90% that are market rate.
00:43:42
Speaker
If it's 100 percent affordable, then you need subsidy from somewhere else. A bunch of grants or taxes or tax credits. Yeah. Yeah. So you're you're making. Yeah. Awesome. So you're making this building in the folks at if it's a 100 percent affordable building, the folks who are going to come and apply to rent at this place are people who are going to prove they earn only a certain amount of income. These are folks who are who are struggling a little more.
00:44:06
Speaker
not as much income or other hardships. And there's a whole lot of process and paperwork like there is with any kind of rental thing, but more. And it'll make sure that those folks who really need it can move in and can and their rent is going to be lower, sometimes substantially lower than what the local, quote unquote market rate would be. It's lower than market rate. It's much lower than market rate. That doesn't mean it's something anyone can afford.
00:44:32
Speaker
Right. Affordableism. That is a reasonable thing to be dissatisfied about, but that's a longer issue. So maybe let's come back to that some other time.
00:44:42
Speaker
Yeah, that's a different rabbit hole for sure, for sure. But in general, it's going to be more affordable, less expensive than mercury stuff. So OK, SB 35, the slaw they got passed five years ago, which is forever in housing timelines. But you're saying most of these got built as 100 percent affordable because the folks building it didn't have to use skilled and trained that this labor requirement. So basically it made it more affordable for them to
00:45:10
Speaker
Build it or maybe even they could get it built because they didn't have to wait for Those union workers who met those skilled and trade skilled and trained. Sorry requirements so so basically so do you think it was a cost thing or do you think it was like a we just Couldn't get it built because those laborers weren't available. You know what I mean? I think it's both because you know time is money and
00:45:34
Speaker
Yeah, fair, fair, fair. It would probably cost more because they would have looked at the beginning, how much is it going to cost, even in ideal circumstances, to hire these workers. And I don't think, by the way, that projects got pushed into being 100% affordable. I think that all the projects that weren't 100% affordable simply didn't happen.
00:45:53
Speaker
Oh, got it. So the ones that succeeded were the 100% affordable. Yeah. That makes sense. Yeah. Can I ask a sort of off the wall question about the skilled and trained thing again? Yeah.
00:46:06
Speaker
Like if I'm somebody who just wants to rent a place and I just want it to be well made, like I want, you know, I want the plumbing to work and I want that there's a crack and this is my apartment is open. There's a crack in the wall over there. Cause there's an earthquake recently. And I was like, did that crack just get bigger? Whatever. Do you, do you think that if you, if you were using union and you're using skilled, skilled and trained labor, that you are coming out with a product that is better?
00:46:31
Speaker
By and large, yes. I think that your union labor is going to know more, is going to have more experience, is going to have more training from their peers, not just picking stuff up on the job or from their trade schools. Yes, I think that you do get a benefit from getting union labor. You might do the work slower, but you might do it much better.
00:46:57
Speaker
Okay. Yeah. Awesome. That said, that doesn't necessarily make the project pencil at the start. Fair. Pencil meaning you got to make money on it otherwise. Workout from a profit and loss point of view. Yeah. Okay. Another, if I may, another small rabbit hole.
00:47:20
Speaker
I'm going to get this wrong, but didn't Senator Scott Weiner from San Francisco, a notorious housing senator, didn't he try and pass something where there was a requirement for union labor projects? There was some rule that said, you have to be training up more people when you build this kind of project. Am I making that up? You know what I'm talking about? If anyone would know this off the top of their head, it's you.
00:47:50
Speaker
I think someone knows it and it might not be me. Well, no. Well, actually going back to 2011, there was a small requirement.
00:48:02
Speaker
for projects under AB 2011 to, I think, have apprentices from these programs. Yeah, that was another thing alongside the prevailing wage. I don't know how much it moves the needle. And there was something about they request apprentices, but maybe they aren't going to get them. And if they ask for them and don't get them, then they can move forward, something like that.
00:48:30
Speaker
There may be something else. Yeah, but I think it makes sense to simultaneously try to build up the skilled and trained workforce because it is a good workforce. Yeah. Yeah, like that's the- You want to have- It's that chicken and egg thing. Yeah. It's a tough nut to crack though, right? Because how do you incentivize or how do you get unions to train up more skilled people when, again, it's not even really clear that there's going to be enough work for
00:48:58
Speaker
Um, all the skilled people they have right now, although I guess there is, if we're, if we're seeing these, if we're seeing SB 35 projects going up and it's only the ones that can avoid the skilled and trained labor clause, that seems to indicate that there is more work than the, these unions can do. Yeah. Anyway. Okay. Well, sure. So SB 423 was the new bill in 2023.
00:49:28
Speaker
And part of the reason we needed it was SB 35 actually had a ticking clock. It was going to expire in 2026. So it needed an expiration bill. So 423 made it permanent. And it did some other little tweaks, but the biggest thing it did was simply to take those 2011 labor standards of prevailing wage, health insurance, and apprentices.
00:49:57
Speaker
and make that the new standard for SB35. Take away the skills and trades. You're right. So you could build 10% or 20% affordable projects without union labor. Oh. Yeah. OK. And were the trades, were the unions on board for that bill? No. And that's where the lack of
00:50:21
Speaker
lack of closure to the previous year's negotiations came back to bite them. Because I think the proponents thought, OK, the trade sort of backed down here. So we're going to pass this and it's going to look like 2011. And because they allowed 2011 to pass, they might be grumpy about it, but they'll allow this to pass. Turned out, no, they oppose this even harder. Oh, OK. And it was a bit of a battle royale. And the thing was, though,
00:50:51
Speaker
What happened this year was the carpenters started peeling off more unions to their side. The laborers, operating engineers, who are members of the state building trades council, they started coming around and supporting 423 because this was starting to make sense to them too. And they were starting to wonder, in my opinion, as an outsider, they were starting to wonder why the trades were so dead set on this.
00:51:21
Speaker
Wow. I mean, there's got to be some inside baseball politics stuff happening there. Who knows? Yeah. Yeah. And the short story is they backed down. The carpenter sit or the trade? No, the building trades. Wow. Okay. So 423 passed. 423 passed and it continued to take out the skilled and trained requirement. They did come to an agreement where there was some compromise where skilled and trained is required in some circumstances.
00:51:51
Speaker
Okay. And it's basically, if the building is going over a certain height, I think it was 85 feet, I should have that, but it's a height that allows a lot. Most of the projects you're going to get are going to be six to seven stories, so they're not going to trigger this.
00:52:11
Speaker
And then even if it does, if you get over that height limit, then it just says, you have to try to get a skilled and trained workforce. You have to show that you looked for it. And then if, if you don't get enough bids, then you can go ahead with non union. Okay. I mean, so it was really pretty reasonable in my opinion. Yeah, that's it. Let them say face, but it still means that the vast majority of these projects are going to be non union.
00:52:39
Speaker
but with a chance for them to become union. Huh. So we're seeing a big shift, okay, unions, yeah. So we're seeing a shift in where unions are applying their political pressure in Sacramento. Do you think, hmm, I mean, if I'm a political coalition and I've got sort of like dissension among the various groups,
00:53:07
Speaker
In general, to me, that feels like, I mean, I guess what I'm worried about here is are we seeing a weakening of unions? Are we seeing this lack of solidarity among the unions? Is that going to lead to, I don't know, other potential legislative problems?
00:53:27
Speaker
You know what I mean? Too early to say. I think that the lack of housing is extremely anti-union. It forces lower income people out of the state. Yeah, that's real. To places with much worse labor protections. Yeah, that's real. I think that getting housing back on track is part of making the economy work for regular people, which is part of what unions are fighting for.
00:53:57
Speaker
Man, to zoom way out, we need that in California. We're seeing population decrease in California. We're seeing people leave for other places. We're losing congressional districts to Texas and Florida. It's not like people are excited to move to Texas and Florida. People want to live here. This is a great place. We've got a lot of cool stuff. We've got a lot of cool people.
00:54:26
Speaker
California, I think it's a wonderful problem to have, but it is a problem. It's a great, great, great place to be. There's so much opportunity. There's so much diversity. Whatever your particular kind of culture is, you can find it somewhere in California. The only question is, can you find a place to call home when you get here? Anyway.
00:54:48
Speaker
Actually, that brings me to another great thing that happened with SB 423, a completely different political dragon that it slew. Before the renewal in SB 423, its predecessor, SB 35, did not apply to the California coastal zone. Really? Yes, and let's back up here because I'm sure most people don't know exactly what that is.
00:55:16
Speaker
California Coastal Zone is an area usually pretty close to the coast. There is an official map. It's, yeah, it varies. It depends where you are, but it's around the coast. And it is under the extra jurisdiction of the California Coastal Commission, which was originally set up essentially to protect the coast, to make sure it was accessible to everyone, to protect its environment.
00:55:45
Speaker
But the Coastal Commission has also become a great NIMBY defender. Yeah, of course it has. So we're talking about even places like, you know, places that are built up cities that are on the coast, they have been protected largely from up zoning by the coastal interests who say that it is hurting the coast to let more people live there. Yeah. Well,
00:56:14
Speaker
Santa Monica near and dear to my heart where I am right now, maybe in a future episode, I would love to talk about the builder's remedy because that's been a thing that has been happening in Santa Monica because prior to that, there really hasn't been a whole lot of stuff happening, which I think is at least in part due to the coastal commission, although I can't say that for certain, but yeah. Yeah. But yeah, so there have been some victories
00:56:42
Speaker
But there is still a lot of conflict to be had out there. And you can see the conversation changing with regard to skilled and trained comparing what happened in 2017 with the early Scott Wiener bill to what happened in 2023.
00:57:02
Speaker
And it will be really interesting to see how much more productive the SB 423 becomes compared to its predecessor. Yeah. We'll see in the next few years if it really if it makes a big difference and then the economy doesn't totally tank. We might just see a whole bunch more stuff go up because of that. That'd be great. Yeah. But, you know, there are there are those voices that say that even bills like AB
00:57:32
Speaker
2011 are not as effective as they could be because they are loading too much cost onto projects. Because 2011 not only requires prevailing wage, as I said, it also requires a minimum of 15% restricted affordable.
00:57:55
Speaker
And those two things put together mean that the project has to make a lot of money to finance those costs. Which means the rent needs to be really high. Yeah. And it needs to be able to command those rents, which may not be the case. You may not get the projects necessarily. And often they have to pay major fees to the city per unit for it, for the privilege of building.
00:58:21
Speaker
We should do a whole episode sometime, just like walking through the life cycle of trying to get something built. Like take a theoretical building built in San Anytown, California, and just walk through the timeline of what happens between somebody decides they want to build something there, and actually the first renter moves in, because there are just so many weird things in there. And I know I don't even know all of them, but like,
00:58:49
Speaker
There are so many dials to turn and things that can go wrong and difficult things like things that just make it hard to build housing in this state and maybe anywhere, but certainly in California. But yeah, I think we've come more or less up to date. So I am now combing through the bills that have been submitted in 2024. I don't know if there will be as big dramatic ones as there have been last year, but I know there will be some things that we can talk about.
00:59:18
Speaker
I look forward to it. Yeah. Thanks so much again for joining me.
00:59:24
Speaker
Oh my gosh, it's a pleasure. As always, anytime, anytime, anytime I'm so happy to hop on these calls and nerd out with you on this stuff. And yeah, if you want to, I would, I bet folks would love to hear your take on builders remedy. Um, and yeah, if we want to do like a, an imaginary project, uh, I bet it would be illuminating to a lot of folks to understand, um, how one of those things, you know, like that old cartoon about how a bill gets passed, the schoolhouse rock kind of thing.
00:59:54
Speaker
that for how buildings get built, because it's bananas, it's wild. Yeah. Okay. Thanks so much again. And yeah, next week will almost certainly be some of the early bills that have caught my eye. Awesome. And until then, keep on warning.