California Cities and Homeless Efforts to Benefit From SB 197

California cities will have, under certain circumstances, an extended timeframe to complete rezoning required by an adopted housing element now that Gov. Newsom has signed Senate Bill 197 (SB 197). In signing SB 197, the governor also authorized approximately $4.9 billion in appropriations for various housing and homelessness investments in the 2022-23 budget package. SB 197, which was signed on June 30, took effect immediately as part of the budget package.

Cities have been concerned with the short turnaround to approve zoning code amendments under existing law, but if a city can satisfy the criteria below, they will have additional time. Further, while SB 197 provides new opportunities to participate in the authorized housing and homelessness investments, cities will need to be aware of how to comply with the new requirements to ensure eligibility.

Housing Elements – Additional Time to Rezone

Before SB 197, cities had 120 days from the housing element adoption deadline to complete any necessary rezoning. Now, cities will have 3 years and 120 days from the applicable housing element adoption deadline to complete required rezoning when:

• the statutory adoption deadline for the sixth revision of the housing element was in 2021;
• the city failed to adopt a housing element the California Department of Housing and Community Development (HCD) found to be in compliance with specified requirements; and
• the city adopts a substantially compliant sixth revision of the housing element within a year of the applicable deadline.

SB 197 authorizes HCD to grant a 1-year extension for completion of the required rezoning in certain circumstances, if the local government has completed the rezoning and sufficiently accommodated at least 75% of its low and very low income households.

Funding Opportunities
In addition to providing an extended timeframe to complete housing element required rezones, SB 197 includes the following appropriations for housing and homelessness programs:

• California Interagency Council on Homelessness (previously known as the Homeless Coordinating and Financing Council)

Encampment Resolution Program funding appropriated in or after the 2021-22 fiscal year must be used first for any applicable projects not funded in the prior round and next to fund new grants on a rolling basis. For such new grants, additional application information regarding the applicant’s proposal is required, and recipients will be obligated to expend 50% of funds within 2 years and 100% of funds within 4 years of appropriation. Contracts entered into for the program projects will be exempt from certain contracting requirements.

• Local Government Planning Support Grants Program

Recipients of funds under the Local Government Planning Support Grants Program now have an additional year both to expend awarded funds (now until Dec. 31, 2024) and to submit a final report to HCD detailing use of such funds (now until Dec. 31, 2025). SB 197 also requires HCD to update California State Legislature by July 1, 2023 on progress in improving the regional housing need allocation process, with such updated process now being due on Dec. 31, 2023.

• Affordable Housing Preservation

HCD is now authorized to make loans or grants for housing projects with an affordability restriction of less than 10 years – increased from 5 years – remaining in the term. HCD may charge a monitoring fee in lieu of all or part of the annually required 0.42% loan payment, which will be deposited into the Housing Rehabilitation Loan Fund. HCD may capitalize authorized fees as necessary for project feasibility.

• Mobile Home Park Purchase Fund

SB 197 expands authorized purposes for grants or loans under the Manufactured Housing Opportunity and Revitalization (MORE) Program (previously the Mobile Home Park Rehabilitation and Resident Ownership Program) for converting a mobile home park to also include: the acquisition, rehabilitation, reconstruction and replacement of a mobile home park; certain necessary repairs to health and safety deficiencies of a mobile home park; or reestablishment, including relocation, of a mobile home park. SB 197 also modifies the required conditions for program loans and grants, for both mobile home parks and for individual low income residents of such parks, including adding conditions for required affordability restrictions and permitting deferral of repayments for the full term of any loan. HCD will develop guidelines, rules, policies or standards that will be exempt from the rulemaking provisions of the Administrative Procedure Act (APA).

• HOME Investment Partnerships Act

SB 197 authorizes HCD to adopt guidelines, rules, policies or standards to implement allocation of HOME funds. A stakeholder process for such new guidelines must be convened by Sept. 1, 2023. After the adoption of such new guidelines, any repeal of existing regulations will be exempt from the rulemaking provisions of the APA.

• Infill Infrastructure Grant Program of 2019

SB 197 expands the permitted purposes for capital improvement project grants to include creation, development and rehabilitation of parks; bike transit facilities; and traffic mitigation. SB 197 also authorizes HCD to evaluate grant applications and administer program funds, with 5% now set aside for such costs. Eligible applicants for program funds now includes specified Indian reservations and rancherias.

Your BB&K attorney can assist you with strategies for compliance with these new SB 197 requirements.

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