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June 7, 2021

June 4, 2021

Honorable Cecilia M. Aguiar-Curry, Chair
Assembly Local Government Committee
1020 N Street, Room 157
Sacramento, California 95814

RE: Senate Bill 9 – Oppose Unless Amended, Request to Add Protections to “Communities of Concern” and
Affordability Requirements

Dear Chair Aguiar-Curry,

The now-pending Senate Bill 9 proffers opportunities for needed new housing development in the thousands
of single family home neighborhoods of California, both urban and especially suburban. In the abstract that is
a good thing. It would enable construction, with SB 9’s permitted lot split, of up to four new housing units on
any single-home lot in the State. And to protect current residents from displacement, it excludes properties
protected by rent control or other factors. But there are no affordability requirements for the new units – all
can be market rents/prices. SB 9’s proponents believe that over the long term, the “filtering” impacts of the
resulting increased overall housing supply in these neighborhoods will work to reduce housing rents/prices
there too.

Perhaps. But until that may happen in the long-term – 20 years? – in the near term the immediate result if SB 9
passes as now written will be a big jump in the value/price of all the single family home properties where this
new development potential might be used. In the high-cost Bay Area for example, SB 9’s passage will add at
least $100,000 to the price of any feasible house/lot. And most such homes in San Francisco could see jumps
from $200,000 to $400,000 (view lots, etc.).

There is no way that instant price jump in home prices is a beneficial outcome for California. It will put even
more housing units financially out of the reach of today’s hopeful home buyers. And it will make those
properties even more attractive to “investors” looking to profit from the State’s housing crisis rather than make
housing more affordable.

How does that work? The simplest example is an existing home located on a lot big enough for two homes. If
SB 9 passes, that extra space on that lot will then have the same value as any vacant lot the same size in the
same neighborhood. So add that amount to the former value/price of the existing home, and that is the new
higher price for that house.

And if the property has enough room for three new homes – unlikely but possible, especially in in the State’s
‘exurbs’ – add the value of three such vacant lots to its price.

Tear down/rebuild scenarios are more complex. It would only make financial sense to tear down an existing
house if the land value for two vacant lots in that location is more than the existing house is worth itself. This
could apply if that house was very small or run down in bad condition in any city. Or if the property is in a
luxury neighborhood, like Ross in Marin. Or if the property had spectacular views, like Twin Peaks in San
Francsico.

But a tear down/rebuild scenario is much more feasible if the home lot is big enough for four new units after a
lot split as allowed by SB 9. And single homes with lots that size can often be found in older urban
neighborhoods, like East Oakland.

The tear down/rebuild scenario where possible will be very attractive to “investors” looking to make a short
term profit. They don’t build new housing themselves. Instead they will put together deals with a smallish
developer that specialize in small projects like a fourplex. Most will be condos for sale, and even if not they will
be mapped as a subdivision for future conversion to condos without any further local approvals.

There is no way the rent/sales price needed to finance this housing is going to be “affordable” to renters/
buyers with incomes less than 120%-150% of local medians. The land price always pushes overall total
development costs up to the levels “that the market will bear” – that is how market real estate dynamics work.
Which means most current residents of lower-income neighborhoods won’t be able to afford the new housing
that SB9 would make possible to build in those communities. Instead the new residents of those projects
moving in to those largely minority/immigrant central city neighborhoods will be higher paid younger
professionals. And that demographic shift in turn will reinforce and accelerate all the other social/economic
pressures for the gentrification of these communities.

But that doesn’t have to happen. There are two straightforward ways to amend SB 9 and avoid those negative
consequences.

First, the vulnerable urban neighborhoods at risk of gentrification and displacement of lower-income and
minority/immigrant residents can simply be cut out of SB 9 geographically. They are now referred to as
“Communities of Concern” by regional planning agencies, like the Bay Area’s Association of Bay Area
Governments, and many have been identified and mapped already.

Second, SB 9 can require that, when its lot split provision is used to build three or four new units in a single
family home district, then one of those units must be affordable at least to middle income renters/buyers with
incomes up to 150% of local median. That will assure there is no possible loss of existing affordable homes as a
result of the existing house being torn down. And it will provide new housing opportunities for the so-called
“missing middle” households that cannot qualify for subsidized affordable housing yet cannot pay market
rents/prices either.

And that requirement would also have the very beneficial effect of neutralizing much of SB 9 ’s inflationary
impact on existing home prices everywhere described above. Developers could still make a profit on the new
housing, but they could not pay a premium anymore just for the land.

If SB 9 is amended with these provisions, BAFCA would support it. If not, we must oppose SB 9.

Sincerely,

John Elberling
President

 

CC: Honorable Senate Pro Tempore Atkins
Assembly Member Tom Lackey, Vice Chair of the Local Government Committee
Assembly Member Richard Bloom
Assembly Member Tasha Boerner Horvath
Assembly Member James C. Ramos
Assembly Member Luz M. Rivas
Assembly Member Robert Rivas
Assembly Member Randy Voepel

About Build Affordable Faster California
Build Affordable Faster California (BAFCA) is a regional and state advocacy and action project of the Tenants
and Owners Development Corporation (TODCO), a nonprofit community-based community development
corporation in San Francisco’s South of Market Neighborhood (SoMa) since 1971.