Tag: legislation

Cities Attempting to Bypass Duplex Allowance with Local Ordinances

A California law allowing duplexes to be built on lots zoned for single-family residences, SB 9, passed in 2021. However, the law doesn’t have much in the way of enforcement. Cities are finding it relatively easy to avoid this with local ordinances that make it effectively impossible, since they can’t legally ban it. The same sort of thing happened with the struggles with building ADUs, which actually became legal nationwide in 1982, but weren’t feasible in most states prior to 2016.

One example is the town of Woodside claiming that the entire town is a mountain lion habitat, and is therefore excluded from the requirement because it’s a habitat for a protected species. Once this reached the news, Attorney General Rob Bonta got on their case and forced them to reverse the decision. All the AG’s office needs is proof that municipalities are attempting to skirt the requirement, and then they can take action. Without an enforcement agency, though, they’re reliant on the spread of information through media, including social media.

Photo by Taneli Lahtinen on Unsplash

More: https://calmatters.org/housing/2022/04/california-duplex-housing/

How to Become a Property Manager

Property management is a practical field to enter if you are worried about economic stability. It’s incredibly recession proof, as housing is a necessity and therefore people will be renting properties regardless of the economic conditions. But you can’t just decide on a whim to be a property manager — it has legal requirements and best practices.

In the vast majority of cases, being a property manager requires a broker’s license. There are certain cases in which it doesn’t, but they would not apply for rental properties, which are the bulk of managed properties. If you don’t want to get a broker’s license, though, you can consider managing commercial properties, but there would still be many restrictions.

First Tuesday, a real estate journal, has assembled a Property Management 101 infographic, complete with links to articles and PDFs for additional explication. This contains more specific details about the legal requirements, other applicable laws, and market information. You can find the infographic here: https://journal.firsttuesday.us/property-management-101/82682/

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CA Bills Up For Vote This Week

Among the California State bills that the Assembly is voting on this week are four bills related to real estate. These are AB 2050, AB 2469, AB 2710, and AB 2053. Most of these bills are aimed at protecting tenant rights, while AB 2053 is designed to create revenue-neutral affordable housing. The voting will take place on April 19th and 20th.

AB 2050 modifies the Ellis Act, which allows landlords to evict tenants in order to stop renting the property altogether. AB 2050 would require a landlord to rent out their property for at least 5 years before invoking the Ellis Act. AB 2469 establishes a mandatory statewide rental registry, which prohibits landlords from raising rents or evicting tenants without submitting information to the registry each time the lease is initiated, altered, or terminated. AB 2710 establishes Right of First Offer legislation, requiring owners of currently tenant-occupied property to offer sale to certain qualified entities, including the tenants, before accepting an offer. The seller does not need to accept an offer from qualified entities, but must give them ten days to match any accepted offer. AB 2053 establishes the California Housing Authority, which is designed to build and acquire mixed-use affordable rental housing, which would be publicly owned.

Photo by Wesley Tingey on Unsplash

Eviction Protections Extended for ERA Applicants

Many people are still delinquent on rent payments as a result of the recent recession. Some relief came in the form of emergency rental assistance (ERA), which also required landlords take additional steps before being able to evict for nonpayment. The additional protections were set to expire on March 31st, but there was a last minute change to the law.

Under the new regulations, while the protection will still only apply to delinquencies on rent payments owed before March 31st, it will now continue to apply to those delinquencies through July 30th if the ERA application is still being processed. Tenants will still owe rent for April and subsequent months, even if their ERA application for earlier payments is still being processed.

Photo by Sheldon Kennedy on Unsplash

More: https://journal.firsttuesday.us/covid-19-eviction-noticing-rules-extended-for-era-applicants/82649/

Project Homekey to Expand Homeless Housing Conversions

In response to the pandemic, California launched a program to help a segment of the homeless population acquire temporary housing via hotel conversions. This initial project, called Project Roomkey, applied only to those 65 or older or who had underlying conditions, and would only be active during the pandemic. Seeing its success, California has launched a new, more expansive project, which they’ve called Project Homekey.

Project Homekey seeks to expand conversions to include several different types of properties, not just hotels. In addition, the project is designed to create both temporary and permanent homeless housing. This is made possible by the recent changes to zoning and land use laws, and currently has an $846 million acquisition budget. Unfortunately, managing such large projects requires specialized knowledge that isn’t in large supply. In addition, there has been pushback from local opposition that doesn’t want to see low-density housing converted into high-density homeless housing.

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More: https://journal.firsttuesday.us/californias-homelessness-crisis-vacant-hotels-can-house-the-unhoused/81717/

Homeowner’s Exemption Deadline is Approaching

The Homeowner’s Exemption is a method of property tax savings that has been in place since 1974. It allows any homeowner who has owned their home since January 1st of the year to apply a reduction of up to $7000 to their home’s assessed value for property tax purposes. The full $7000 reduction will only be applied if the homeowner applies for the Homeowner’s Exemption between January 1st and February 15th, otherwise the amount will be prorated. In addition, parent-to-child transfer benefits from Prop 19 also require the child to apply for a Homeowner’s Exemption within 12 months of the transfer.

Despite the fact that the majority of homeowners qualify for the Homeowner’s Exemption, almost a third of homeowners in Los Angeles County don’t apply for it. This accounts for about $30 million in unclaimed exemptions each year. If you are in LA county, in order to apply, fill out the application at www.assessor.lacounty.gov/hox. It can be printed and mailed to the LA County Assessor’s Office, or emailed to  HOX@assessor.lacounty.gov. Currently, there is no fully online application, but there are plans for one soon.

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Market Stability Anticipated In 2024

With government support having ended, this may prompt people to think the economy has stabilized and recovery is imminent. But this is just the precursor to a stable market. The market needs time to adapt under normal conditions, and probably won’t become stable again until 2024. The main factor in overall recovery is the job market, which has yet to fully recover, and a stable real estate market requires construction to catch up to demand.

Some policies remain from government actions during the recession, though. Three laws — SB 10, AB 345, and AB 571 — will help out in construction efforts. SB 10 allows more areas to be zoned for up to 10 units, AB 345 allows ADUs to be sold separately from the primary residence, and AB 571 prohibits impact fees on affordable housing. Two more laws, SB 263 and AB 948, reformed bias training for real estate professionals. This legislation should have lasting impact in making the recovery more comfortable.

Photo by Logan Cameron on Unsplash

More: https://journal.firsttuesday.us/2021-in-review-and-a-forecast-for-2022-and-beyond/81281/

Fed Intends to Speed Up Interest Rate Growth

Interest rates are by no means high right now, but they’ve been steadily rising and can no longer be considered low. Prices have also been high, but they’re predicted to drop dramatically, for a couple of reasons. First, inventory is opening up as foreclosure moratoriums and forbearance programs are ending. The other reason is that the Fed has been reducing their mortgage-backed bond (MBB) purchases. Tapering back MBB purchases will both lower prices and increase interest rates.

The Fed had previously announced plans to keep the Federal Funds Rate at its current value of zero through 2023. However, they’ve now decided that 2022 the year to begin returning to normalcy. With scaled back MBB purchases, the zero benchmark rate is the only remaining factor in economic stability that isn’t transitory. Increasing the benchmark rate will further increase interest rates, though, so 2022 is going to be a year of higher interest rates, but lower home prices.

Photo by Jonathan Borba on Unsplash

More: https://journal.firsttuesday.us/fed-announces-a-quicker-increase-to-interest-rates/81216/

Outdated Zoning Laws Hinder Construction Efforts

While it’s now legal to build multiple units on land previously zoned for single-family residences (SFRs), the cost of construction is still high. The costs of acquiring a site, making sure to conform to environmental codes, and building from scratch definitely add up. Builders aren’t able to work out a positive return on investment for new constructions.

They can cut a lot of the costs by using existing structures and renovating them. But, many of these structures are zoned for commercial use only. There are certainly zones that can be commercial or residential as needed, but not nearly enough to satisfy buyer demand. New zoning laws in the Los Angeles metro area and in the San Francisco Bay Area have facilitated conversions from commercial to residential, but even that isn’t enough. And in areas without these new policies, such as the San Diego and Sacramento metro areas, conversion rates are dramatically lower.

Photo by Al Soot on Unsplash

More: https://journal.firsttuesday.us/california-residential-conversions-limited-by-outdated-zoning/81042/

Mortgage Rates to Transition to New Benchmark

The most commonly used benchmark rate to determine mortgage rates has long been the LIBOR, or London Inter-Bank Offered Rate. However, this has some issues. The LIBOR is not tied to actual transactions. Because of this, bankers that have influence on the LIBOR can simply manipulate the rate to their benefit. This occurred in the 2008 recession, where the LIBOR was kept artificially low to encourage people to borrow money. The financial world has finally decided LIBOR won’t cut it as a benchmark, and it’s being phased out.

Financial institutions won’t be forced to stop using the LIBOR, but if they do use it, they will be required to include at least one rate that isn’t LIBOR-based as a backup. They will have until the end of 2021 to comply. The front runner for a backup rate in the US is the SOFR, or Secured Overnight Financing Rate. This rate is administered by the New York Fed. It’s not subject to the same manipulation that LIBOR is because it does take into account actual completed transactions. Fannie Mae and Freddie Mac already swapped from LIBOR to SOFR in 2020.

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More: https://journal.firsttuesday.us/libor-phase-out-begins-on-december-31-2021-are-you-ready/81002/

Santa Ana Joins List of Rent Controlled Cities

Rent control is highly contentious. Certainly many of its opponents are landlords who stand to lose the most financially. But even among those who agree that something needs to be done to help tenants, rent control isn’t a popular answer, since it seems to do more harm than good in practice by encouraging landlords to exploit legal loopholes to evict tenants — or even just evict them illegally, which is rarely contested in court.

It’s no surprise, then, that the vote to enact rent control in Santa Ana was hotly debated. The final vote was 4-3 in favor, but even the four council members that approved it all admitted it isn’t an optimal solution. The saving grace is that the measure also includes tenant protections. The opposition’s primary contention was that the measures aren’t too different from the existing statewide regulations, making it a largely redundant venture whose implementation and enforcement would be a waste of city and taxpayer money.

Photo by Element5 Digital on Unsplash

More: https://journal.firsttuesday.us/santa-ana-enacts-new-rent-control-measures-amid-staunch-resistance/80923/

2021 Sees Significant Changes in Real Estate Legislation

Almost 30 bills affecting real estate law either are being considered or have passed over the the past year. Among them, a few important ones passed just in the last couple months. We’ve mentioned SB 10 before; that’s the one that allows some areas to be rezoned for up to 10 units. Other important bills passed in September and October are AB 948, SB 263, and AB 345.

AB 948 and SB 263 are similar, but aimed at different groups. Both require anti-bias training for real estate professionals. The difference is that AB 948 applies to appraisers, while SB 263 applies to agents and agent applicants. AB 948 also makes discrimination by appraisers by protected groups illegal, and SB 263 establishes 45-hour long renewal courses. SB 263 goes into effect January 2023. AB 345 makes accessory dwelling units (ADUs) more similar to individual properties. It allows them to be sold separately from the primary residence.

Photo by Sasun Bughdaryan on Unsplash

More: https://journal.firsttuesday.us/legislative-gossip-page/

How the New Zoning Laws May Impact Your Neighborhood

Gov. Gavin Newsom recently signed two housing bills into law, SB 9 and SB 10. SB 9 modifies areas zoned for 1 unit to also allow duplexes. However, it isn’t without restrictions — it also limits the construction that would convert a single home into a duplex to homes that have not been rented out in the past 3 years, and only allows 25% of the external walls to be demolished if it is a conversion and not a new construction. SB 10 is aimed at helping local governments to streamline processes for allowing up to ten units on lots formerly zoned for SFRs, but only if the lot is over 8000 square feet.

One region in which these bills were highly contentious is Long Beach, which has 59,803 single-family lots. But the laws aren’t likely to change things as much as people think, especially SB 10. Only 4,609 are eligible for the provisions under SB 10, due to the lot size restriction. Moreover, the City of Long Beach is under no obligation to allow up to ten units at all — the bill merely streamlines the approval process, should they choose to. A significantly larger number of units could be affected by SB 9, but city officials expect that between 17000 and 28000 units would be ineligible due to the rental restrictions, and there’s no guarantee that the eligible units would be converted. In addition, ADUs are already allowed, and the biggest difference between an SFR-plus-ADU combination and a duplex is the size of the units.

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More: https://lbpost.com/news/the-governor-signed-2-controversial-housing-bills-heres-what-it-means-for-long-beach

FHFA Has Extended ‘First Look’ Period

The Federal Housing Finance Agency (FHFA) established the First Look Program back in 2009, aimed at promoting neighborhood stability by facilitating occupation of real estate owned (REO) properties by owners. The program created a special time period during which prospective owner occupants, public entities, and nonprofits would have exclusive rights to purchase properties owned by Fannie Mae or Freddie Mac, before investors would have access. Until now, this time period was 20 days. On September 1st, the FHFA extended this period to 30 days. They deemed this move essential during a period of low supply, to reduce the level of competition prospective owner occupants have to contend with.

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More: https://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-Extends-the-Enterprises-REO-First-Look-Period-to-30-Days.aspx

Bipartisan Infrastructure Bill In the Works

The US Senate has now passed a bipartisan bill aimed at improving infrastructure. The bill details budget investments for repairs, updating, new construction, and weatherproofing. Much of the money is aimed at roads and bridges, and various different budget plans all focus on clean environmental efforts, such as clean water, clean energy, and electric vehicle chargers. The bill doesn’t have many provisions that explicitly focus on housing, but improving infrastructure will have an indirect impact.

The most significant impact on the housing industry will be in job creation. While some of the positions that are being funded already exist, others don’t and will need to be created. This means more people will need to be hired. The slow recovery of the job market is the primary reason our recovery from the recession has been so drawn out. The infrastructure bill will hopefully not only establish a better infrastructure for the future, but also create more jobs now to speed up recovery. With a recovery of the job market, housing market stability will soon follow.

Photo by CHUTTERSNAP on Unsplash

More: https://journal.firsttuesday.us/how-the-infrastructure-bill-supports-housing/79580/ [Note: The article states that the House has yet to vote on the bill. In fact, the House voted on and passed the bill before the Senate voted.]

Proof of Fire Buffer Zone Required for Some California Homes

In response to increasing frequency of wildfires in California, the state wants to make sure residences are in compliance with fire safety law. Existing state law already requires what is called defensible space, which is a buffer zone between flammable plant material and any structure on the property. Now, sellers are going to be required to provide proof of compliance with this law if their property meets certain conditions. This applies if the property is a condominium, common interest development, or manufactured home, is zoned residential 1 through 4, or is located in a high or very high fire hazard severity zone.

Photo by Hans Isaacson on Unsplash

Are Homeownership Subsidies the Answer?

California is proposing a plan to start the “California Dream Fund,” which is intended to allow the state to subsidize purchases by first-time homebuyers without any tax increases. They hope to achieve this by allowing investors to use their money to subsidize the purchase, in exchange for an equivalent share of ownership. This will be limited to 45% to prevent the investors from owning a majority share.

The plan is still in the works, but there are already a few criticisms. Currently, there is no indication of who is liable if the property goes into default. Is it only the buyer? Do the investors have a stake, since they have an ownership share? Is the state liable since they’re the ones providing the subsidy program? Perhaps these questions will be answered later, but if the answer is simply as existing law, the program is no different from a state matchmaking program between investors and prospective homebuyers. Furthermore, subsidizing home purchases does nothing to address the real problem — the fact that home prices are so exorbitantly high in the first place that the plan is being discussed to begin with. Subsidies will increase demand, but demand is already high; it’s the low supply that needs to be addressed.

Photo by Andre Taissin on Unsplash

More: https://journal.firsttuesday.us/proposed-plan-seeks-to-subsidize-nearly-half-the-price-of-a-first-home/78445/

Cities Will Soon Need a Plan to Process Organic Waste

A 2016 state law requiring organic waste to be processed separately from inorganic waste goes into effect at the start of 2022. However, even with the six year forewarning, cities still aren’t necessarily equipped to handle the change. Some cities, such as Carson, have processing plants allowing them to convert food waste into methane for use as renewable fuel, with fertilizer as a byproduct. But food waste isn’t the only type of organic waste, and the Carson facility can’t process other kinds.

Processing infrastructure isn’t the only issue, either. The cities’ sanitation departments will also need to change the way they collect. That’s easier said than done. The new law didn’t provide any additional funding, and Long Beach can really only afford to provide one additional bin to each household, so they’ll need to put all of their organic waste in the same bin. That means it’s going to need to be either resorted later, or processed at a facility that can process all types of organic waste. Some of the costs are probably going to come in the form of increases to collection bills for residents.

Photo by ADIGUN AMPA on Unsplash

More: https://lbpost.com/news/trash-smoothies-could-be-future-sources-of-fuel-but-cities-first-need-a-plan-to-process-organic-waste

End of Utility Disconnection Moratorium Could Spell Trouble

Last year, the California Public Utilities Commission (CPUC) imposed a moratorium on utility disconnects for nonpayment. The CPUC moratorium applies to both residential and commercial buildings, and they regulate the majority of electric and gas companies. However, this moratorium is slated to end July 1st, and the total amount owed is fast approaching $2 billion.

Utility companies aren’t about to simply forgive all of these charges. Fortunately, they’re thinking of plans that can help people balance their debts without owing large lump sums. Possibilities include partial forgiveness and/or rate categories, or even full forgiveness for qualifying households. California is also working on including utility aid in their state budget plan.

Photo by Federico Beccari on Unsplash

More: https://patch.com/california/redondobeach/s/hlwq5/unpaid-ca-utility-bills-approaching-2-billion-survey

Expanded Dining Options to Remain Throughout 2021

As a concession to restaurants during COVID-19 restrictions, they were given access to expanded outdoor dining space and the option to provide alcohol as part of takeout orders. Indoor capacity restrictions have recently been removed, but in California, these options are staying throughout the rest of the year.

City officials agree that outdoor dining has brought something to the cities that they were lacking. Even though many of these new spaces are not zoned for eating areas, San Francisco mayor London Breed says they brought new life to the city even during a pandemic. In fact, she wants them to stay permanently, not just through 2021. There’s also a bill to extend to-go alcohol indefinitely.

Photo by Gabriella Clare Marino on Unsplash

More: https://lbpost.com/news/california-to-allow-sale-of-to-go-cocktails-through-2021