CA Can Sue Municipalities for Failing to Meet Housing Goals

Many California cities are struggling with lack of affordability and inadequate supply of housing, which has been increasingly felt in the Silicon Valley region. With supply not meeting demand, home values and rent growth has skyrocketed, pricing many families with moderate or low incomes out of the market. Gridlock on the freeways can even be attributed to the affordability crisis, since people must live further away from where they work in order to find housing.

Many cities, while faced with inadequate housing, at the same time must deal with pressure from homeowners who do not want large developments in their communities. This is often led to stalemates between developers, zoning boards, and vocal residents.

As an incentive to municipalities to act more quickly on approving new housing construction, Gavin Newsom and the California legislature have proposed levying steep fines and potential law suits on California cities and towns that fail to meet housing goals.

Rent and home price stabilization is dependent upon increasing supply to meet the critical needs in California communities. Since many communities don’t move quickly enough to approve new developments, Newsom and state lawmakers used the issue to break a stalemate over the new state budget. In the agreement, the state of California would be allowed to sue cities for failing to meet their housing goals, and proposes penalties, should the the courts find in favor that the state, that could range from $10k/mo to $600k/mo.

Negligent cities would have 1 year rectify the situation and begin building, before penalties would begin. In addition, the legislation sets aside $1B as a reward incentive to cities that aggressively pursue added housing capacity.

Newsom, Assembly Speaker Anthony Rendon, and Senate President pro Tem Toni Atkins, had this to say in a joint statement:

“The high cost of housing is chief among the affordability and quality of life challenges families face. Importantly, we have come to agreement on a package of housing measures, one that creates strong incentives—both sticks and carrots—to help spur housing production across this state, all while providing significant levels of funding to fight homelessness.”

San Jose Mayor Sam Liccardo agrees.  “We’re at a point in this crisis where we need more than just carrots. We need sticks.”

The proposal must still be approved by both chambers of the state legislature.

Keystone Commercial Brokerage serves the needs of commercial real estate investors in the Santa Clara and San Mateo counties, specializing in commercial property, multi-unit residential, office space, and multi-use property. Paul Phangureh has over 16 years of experience in buying and selling in the Santa Clara and San Mateo County areas. Contact Paul at 650-924-2544, or email at [email protected]

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