California, like much of the country, is facing a major housing shortage, especially for affordable housing. It's estimated less than 3% of California cities are on track to meet the housing goals established by the state. Los Angeles County alone is short 500,000 affordable housing units. Yet at the same time, the Golden State is facing an increasing number of vacant and abandoned retail properties. Exclusionary zoning laws restrict what type of properties can be used where. It's the reason residential neighborhoods are made up of homes rather than a mix of office space, retail shops, or industrial buildings in between. It's also the reason abandoned buildings aren't being converted into much-needed housing. But that's about to change.
New bills could pave the way for more affordable housing
Several bills, including the American Jobs Plan and Senate Bill 6 from California, are working to relax zoning barriers and allow for old, unused space to be adapted particularly for affordable housing. SB 6, which had its first pass in the Senate on May 24, 2021, allows developers to build on commercial property without having to rezone the property to residential use.
Rezoning can be a daunting task and the majority of the time a fruitless effort. It's the reason most developers don't even bother attempting to utilize the potential of adaptive reuse or turn commercial properties into residential ones. The SB 6 bill, in addition to another, would eliminate restrictive zoning policies to help developers in the private market deliver much-needed supply, particularly redeveloping abandoned large retail stores or malls into new apartments.
The money is there, but the zoning is not
The state of California has already dedicated $5 million to affordable housing and the U.S. government has plans to allocate billions of dollars to help increase the supply of affordable homes and rental units across the country through HUDs proposed budget and the American Jobs Act. The money to back the creation of affordable housing is there, but the zoning policies aren't, at least not on a broad scale. The city of Salinas is in the process of rezoning a closed Kmart, and developers in San Francisco recently shared their plan to build 3,000 homes in the parking lot that surrounds Stonestown Mall.
Residential property taxes are usually a higher tax rate than commercial property taxes, meaning this law, if passed in the Assembly, would result in less income for the local municipality, making it a hard sell for opponents of the bill. But if passed, it would be the first of its kind to remove exclusionary zoning laws in the country.