Senate Bill 5 Would Provide Sustainable, Ongoing Funding for Constructing Needed Homes
The City of Santa Cruz announced it supports Senate Bill 5, which establishes a state partnership with cities and counties to provide an ongoing, sustainable source of funding that will allow Santa Cruz to address the affordable housing shortage.
“The housing crisis is a significant problem statewide, and nowhere more critical than here in Santa Cruz,” said City Manager Martín Bernal. “Families are spending so much on housing that it’s crowding out their ability to afford basic essentials, such as food, clothing, health care costs and transportation. Too many families are just one emergency away from being homeless.
“SB 5 will provide a sustainable, ongoing source of funding that cities can use to subsidize affordable housing. What’s important to me and to everyone on the council is to build up the housing stock to get families into homes where they can thrive. SB 5 will us help do that.”
SB 5 establishes a new, state-backed property tax increment program that provides cities and counties the resources they need to subsidize affordable housing, invest in infrastructure needed to support housing, and to invest in housing near job centers to reduce long driving commutes and bring the state closer to its goals of reducing greenhouse gas emissions and addressing climate change.
When the state abolished redevelopment in 2011, it wiped out the only source of ongoing funding available to local governments to build affordable housing and supporting infrastructure. SB 5 is not redevelopment, but it will provide cities and counties with ongoing funding to support housing and critical infrastructure.
Since the elimination of redevelopment, cities have been struggling to incentivize the building of affordable housing. More and more families have been priced out and the homeless population has exploded. Today, more than 2.2 million extremely low-income and very low-income renter households are competing for only 664,000 affordable rental homes. That leaves more than 1.5 million of California’s lowest-income families without access to housing, forcing many into homelessness.
Specifically, SB 5 allows cities and counties to maintain property tax increment in dedicated zones where they’ve developed a state-approved plan. SB 5 commits to local governments $200 million in tax increment funding annually beginning in 2020, eventually capping at $2 billion annually. Local governments can use the revenue for the following purposes:
- The construction of affordable housing available to very low, low- and moderate-income families. SB 5 is estimated to create 86,000 new and rehabilitated housing units over the next 10 years. A minimum of 50 percent of funds must be dedicated to housing.
- Transit-oriented development in priority locations that maximize density and transit use and contribute to a reduction in vehicle miles traveled and greenhouse gas emissions.
- Infill development by rehabilitating and improving infrastructure and through the revitalization of previously developed, underutilized land in the urban core.
- Revitalizing and restoring existing neighborhoods.
SB 5 contains strong accountability provisions to ensure funds are only spent on state-approved projects, including:
- SB 5 creates the Affordable Housing and Community Development Investment Committee empowered with strong state oversight to approve or reject all projects proposed by local governments.
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- Cities must use funding for state identified priority projects including building affordable housing; promoting infill, transit-oriented development; and addressing climate change. Cities have discretion for developing plans to use funding for these priorities.
- Cities and counties must submit annual spending reports to the Legislature.
- SB 5 creates a cap on funds available at $200 million annually beginning in 2020 and $250 million annually after 2025. After the program is ramped up, total annual general fund spending cannot exceed $2 billion annually.
- The Legislature can suspend new plans during fiscal downturns.
- SB 5 provides state resources to ensure funding for schools and community colleges are not impacted. SB 5 requires that at least one member of the Affordable Housing and Community Development Investment Committee has an education finance background.
While the Governor and Legislature have proposed one-time funding, there is a significant need for ongoing and sustainable funding dedicated to affordable housing, community revitalization and related infrastructure.
SB 5 is supported by a broad coalition of business, labor, local governments, housing advocates, and community leaders.
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For more information, visit www.cityofsantacruz.com