Politics & Government

California cities face $600K fines if they break state housing law in Newsom’s budget deal

California will punish cities and counties that don’t meet their housing goals under a deal Gov. Gavin Newsom and legislative leaders announced Thursday.

If a court finds that a city or county violates a state law that sets targets for how much housing a community must plan to build, the fines could range from $10,000 to $600,000 per month, according to the bill language published Thursday.

Local governments would have a year to comply before the fines kick in after a court finds them in violation of the law. The fines would increase over time if the local government remains out of compliance.

After six months of fines, the court could take over a local government’s authority over its housing plans.

Newsom and lawmakers have also agreed to create a $1 billion fund to reward communities that pass laws aimed at building more units. Those “pro-housing” local laws could include reduced parking requirements and allowing more multi-unit housing.

Newsom, who faces a midnight deadline to sign or veto the budget, had said he didn’t want to sign it until there was a deal to punish communities that aren’t building enough. Newsom has said repeatedly that California’s housing shortage is a crisis that must be addressed.

“If cities aren’t interested in doing their part, if they’re going to thumb their nose at the state and not fulfill their obligations under the law, they need to be held accountable,” he said at a Tuesday news conference.

The agreement indicates Democrats in the Legislature thwarted Newsom’s plans to withhold money for road repairs in communities that weren’t planning to build enough housing.

Newsom had threatened to cut money raised from the state’s gas tax, sometimes referred to as Senate Bill 1 funds after the 2017 law that increased fuel taxes. He proposed withholding the money starting in 2023.

But that idea met resistance from some Democratic lawmakers. They argued that they had promised voters the increased gas tax would fund road repairs in their communities and that cutting that funding would be unfair.

The deal is the latest attempt by Newsom to punish communities that aren’t building enough. He sued Huntington Beach in January, arguing the Orange County city isn’t allowing enough housing for low-income people. He’s also threatened to sue other cities that don’t meet their targets.

Lawmakers and Newsom on Thursday also announced a deal to divide up the $650 million already designated for homeless aid.

Under the agreement, $275 million will go to big cities including Sacramento that have more than 300,000 people. Counties will get $175 million and regional agencies called continuums of care will receive $190 million. That leaves $10 million to be allocated later.

Sacramento Mayor Darrell Steinberg had been pushing for the $275 million for cities, which Newsom had called for in May. He said Sacramento will use its share of the money to build more shelters to bring people inside and off the streets.

“We are confident that it’s a great investment,” he told The Bee earlier this week. “The big cities are right at the epicenter of the homeless crisis.”

Graham Knaus, executive director of the California State Association of Counties, praised the agreement for increasing homelessness funding for counties but criticized the harsh punishments for jurisdictions that aren’t meeting their housing goals.

“We find the new penalties on local governments already struggling to add housing and address homelessness concerning,” he said in a statement. “Nonetheless, California’s 58 counties stand ready and committed to meet this challenge.”

The deal to finalize the housing-related parts of the budget also includes:

  • $250 million to help communities plan to build housing
  • $500 million for housing-related infrastructure
  • $500 million for mixed-income housing
  • $500 million to expand the state’s Low Income Housing Tax Credit program.
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Sophia Bollag covers California politics and government. Before joining The Bee, she reported in Sacramento for the Associated Press and the Los Angeles Times. She grew up in California and is a graduate of Northwestern University.
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