How the money voted...
California Senate Bill 50 died last week after multiple attempts at life support. This bill would have significantly increased the amount of commercial real estate in California. But does that mean real estate investors wanted it?
We looked closer at this vote with an eye on the senators who were backed heavily by real estate contributions.
The aim of SB50 was to address statewide housing shortages by upzoning high-density housing near public transit and “job rich” areas. In simple terms, it would have made permitting easier for multifamily developments near BART, Caltrain, major bus lines and ferry terminals. But it would also prioritize housing near heavy job creators like retail centers, office parks and industrial areas.
So you can see the clear CRE impact here.
And yet, as a CRE investor, which side are you on? SB50 might fast-track you to expanding your 4-unit multifamily into a 40-foot mixed use complex. Yet, it might also have increased supply to a level that lowers your rent value.
Support and opposition came from all sides. They liked increasing the housing stock. They didn’t think enough was being done for below-market housing. They liked the environmental impact of putting more people near jobs and transit. They didn’t like the idea of gentrification.
Back and forth and back and forth.
While 18 senators voted for the bill, it needed 21 votes to pass. Only 15 voted against, but six non-voting senators effectively killed the bill with inaction. Here’s what some of the numbers showed:
- More real estate money said “No.” Senators voting “nay” have accepted $8,696,680 in campaign contributions from “Finance, Insurance and Real Estate.” The “yeas” have accepted $6,298,775, meaning 58% of real estate investment effectively opposed the bill. Of course, this includes ALL real estate, both commercial and residential. While the CRE industry may have supported the new business, single-family residential NIMBYs were largely credited with not wanting more people invading their space.
- “Nay” money spoke twice as loud. Of the 39 senators, 12 have taken more money from “Finance, Insurance and Real Estate” than any other category. Of those 12, four voted “yea” and eight were “nays.” Of the senators who might most be influenced, twice as many opposed.
- Labor was also prevalent. Labor union activists factor heavily in this conversation, as it’s the working class, lower-income residents who are more heavily effected by housing shortages. Yet it’s also lower-income residents affected by displacement when development rearranges property. Plus a large portion of labor is represented by construction, distribution, or on-site services…driving tasks that could care less about mass transit. But here labor was more supportive, with 12 labor-backed senators voting “yea,” compared to seven opposed.
- LA hated the bill. Of the 21 senators opposing or not voting, 13 were from the Los Angeles area, with another six from nearby Southern California and San Diego districts. The SB50 author — San Francisco Senator Scott Wiener — has explained that as: “The politics of housing and land use in Los Angeles are very challenging. We have gone off a housing cliff before Los Angeles. Things have gotten so bad in the Bay Area that there is more openness to new approaches to housing. I think Los Angeles unfortunately is moving in that direction.”
So all told, we’re right back where we started. The question remains, what’s the right way to address the overwhelming demand for space in California? As a CRE investor, what do you think?