CA's Unused Strip Malls, Box Stores To Become Affordable Housing

CALIFORNIA — California is set to allow developers to convert underutilized or empty commercial buildings — such as shuttered box stores — into affordable housing, according to historic legislation signed by Gov. Gavin Newsom on Wednesday.

The Democratic governor signed two bills — Senate Bill 6 and Assembly Bill 2011 — to incentivize developers to convert commercial corridors originally zoned for retail and office buildings to help the state bolster housing options.

“This is a moment on a journey to reconcile the original sin of the state of California, and that's the issue of housing and affordability,” Newsom said Wednesday. “We need to all be a little bit more accountable to this crisis of affordability.”

The two bills also cement union-scale wages and guarantee an expedited construction process. Developments will be kept close to city centers to avoid sprawl.

Newsom announced the historic new legislation at a news conference in San Francisco. The bills are meant to take aim at the state's "sin" of housing affordability and to "rebuild the middle class."

"It has been a stubborn issue. Decade after decade after decade, just fighting and talking about it and fighting each other in the process," he said.

The bill's signing was almost compromised this year as unions, developers and affordable housing groups attempted to stall the legislation over opposing arguments over labor standards.

But AB 2011 did receive the support of the powerhouse California Conference of Carpenters and the Service Employees International Union of California. SB 6 was backed by the State Building and Construction Trades Council of California.

Local government officials say the laws undermine their authority and upend years of careful planning that reflect community preferences. But there's also a financial consequence, they say, because stores generate more property taxes for local governments than homes do.

“It's a concern when state law is going to override these local decisions, particularly when these local decisions are made in a public process with the community as part of a larger housing plan,” said Jason Rhine, assistant director of legislative affairs for the League of California Cities.

AB 2011 could spur the development of 1.6 million to 2.4 million new homes, depending on market conditions, according to an August analysis by UrbanFootprint, a platform that analyzes city data for urban developers and local governments.

"The Middle-Class Housing Act or SB 6 can result in the construction of at least 2 million housing units and is one solution to build up and avoid sprawl," said Sen. Anna M. Caballero (D-Salinas), author of one of the laws, in a statement.

The same analysis found that the legislation supports state environmental goals by pushing for new homes on commercial corridors. Households built in these corridors typically use 40 percent less water, drive 33 percent fewer miles and produce up to 45 percent fewer greenhouse gas emissions, according to the analysis.

The median price of a single-family home is more than $800,000. Plus, half of renters are spending more than 30 percent of their income toward rent.

"This crisis has been escalating for decades," researchers of the analysis wrote.

California's estimated shortfall in housing production is at 700,000 to 110,000 houses per year, which have triggered a statewide deficit of 2.5 million homes, according to the California Legislative Analyst’s Office Report, and California’s Housing Future study.

California, the nation's most populous state with just over 39 million residents, has a housing shortage that has driven up home prices and contributed to a homelessness crisis. State officials say California needs to build about 310,000 new housing units each year over the next eight years, more than 2 1/2 times the number the state normally builds each year.

“AB 2011 has tremendous potential to unlock ... a ton of land for development that was previously off limits,” David Garcia, policy director for UC Berkeley’s Terner Center for Housing Innovation, told the Los Angeles Times. “It’s a huge deal.”

AB 2011 will let developers build housing on some commercial land without having to ask permission from local governments, as long as a certain percentage of the housing is affordable. SB 6 will let developers build all market-rate housing on some commercial land — which would be more lucrative — but the projects would still have to go through an environmental review process.

“Stores are leaving permanently, the Sears, the Toys R Us, the JC Penneys, the Kmarts — they are closing,” said Caballero. “There is not a thing that is going to take the place here commercially, and so the ability to actually transform the property and to do it in an expedited way ... is invaluable.”

The new laws reflect a compromise between labor unions and housing developers. Some labor unions, including the powerful State Building and Construction Trades Council of California, had insisted that legislation should require a “skilled and trained” workforce to build the housing. That means a certain percentage of workers would have participated in a state-approved apprenticeship program.

But housing developers argue there aren't enough workers available to meet that standard, which would make some projects difficult to complete.

The solution was to give homebuilders a choice. The bill that requires affordable housing does not require a skilled and trained workforce, while the bill that doesn't require affordable housing does require one.

“Doing anything that is big or consequential in the Legislature isn't easy. And it can be messy. But at the end of the day, all sides came together," state Senate Democratic Leader Mike McGuire said.

The new laws will take effect July 1 of next year.

The Associated Press contributed to this report.