Tool to Build Affordable Housing Stalls in California Legislature

A bill to bring back redevelopment agencies — a controversial tool used to fund affordable housing at the local level — has stalled in the California Legislature.

The legislation would have created a new version of the program that was generating around $1 billion a year in so-called "tax increment financing" for affordable housing when it was eliminated in 2011.

But prospects for the passage of "redevelopment 2.0" turned bleak when Gov. Gavin Newsom came out against the idea, even after he embraced it during his 2018 gubernatorial campaign.

On Tuesday, Assemblyman David Chiu, D-San Francisco, said that he was holding his redevelopment legislation, Assembly Bill 11, until next year.

Chiu's bill would have allowed cities and counties to designate a redevelopment zone, and, with state approval, redirect any new property tax money created in the zone toward infrastructure and affordable housing.

Unlike the previous version of redevelopment, Chiu's bill was not focused on economic development projects, which became political targets after examples of waste and abuse emerged.

Gov. Jerry Brown moved to end the program upon taking office during the Great Recession. In late 2011, a state Supreme Court ruling led to the dissolution of redevelopment agencies.

AB 11 would have made the state responsible for backfilling the property tax dollars that currently go to California schools and would have been redirected to brick-and-mortar projects.

The idea of redevelopment as a new funding source for affordable housing was supported by Gavin Newsom during his campaign for governor.

"We were excited when then-candidate Gavin Newsom had committed to working with the Legislature to bring it back," Chiu said.

But the idea of redirecting property tax dollars from schools faced opposition from the California Teachers Association.

And when he unveiled his state budget proposal in January, Gov. Newsom decided there were better ways to address the state's need for affordable housing funds.

"Bringing back redevelopment? I looked at it," Newsom said. "We're putting more money [toward affordable housing] now than when we killed redevelopment. And we're doing it in a way that doesn't take money from the education system that requires the backfill."

Chiu said the governor wanted to improve how local governments plan for new housing before committing to an ongoing source of new money. Newsom's budget proposes $250 million to help with local housing plans.

"It is the preference of the governor's office that we move forward these ideas not this year, but focus this year on insuring that cities and counties are doing the planning that they need to get ready to build a lot more housing," Chiu said. "And then focus on tax increment financing tools next year and beyond."