Senator Wiener Introduces Legislation To Boost Production of Workforce Housing

SAN FRANCISCO – Senator Scott Wiener (D-San Francisco) introduced SB 336, legislation to expand California’s existing welfare tax exemption for building homes for low-income Californians to include housing for moderate-income Californians as well. SB 336 provides desperately needed financial support to help make “missing middle” housing for essential workers like nurses, teachers, firefighters, and construction workers financially feasible.

“Building housing for middle-income households like nurses, firefighters, and teachers is essential to secure a bright future for California,” said Senator Wiener. “Unfortunately, they are being left behind by our housing system. Expanding the welfare tax exemption will help make these critical projects financially feasible.”

California’s existing welfare tax exemption provides a full property tax exemption for housing projects serving low income people, defined in law as households earning less than 80% of the Area Median Income (AMI). The exemption is a critical component of financing these projects.

Unlike low-income housing projects, those serving moderate-income households (up to 120% of AMI) do not benefit from the welfare tax exemption or most sources of public subsidy. Such projects fall well below the rent levels market-rate housing projects command in many California jurisdictions, meaning they are not as profitable to produce. In many jurisdictions, they are completely financially infeasible — for example,  in San Francisco, the value of a 120% AMI building is roughly equivalent to 75-85% of its construction cost.

The result is that little housing is built for middle earning households such as nurses, teachers, firefighters, police officers, and construction workers, who typically earn between 80-120% of AMI. Many California jurisdictions build both subsidized low-income and market-rate housing at higher rates than they do middle income housing. Statewide, California jurisdictions only met 60% of their moderate-income RHNA targets in the 5th RHNA cycle. This is why moderate-income workforce housing is often referred to as the “Missing Middle”. 

Local jurisdictions across the state are struggling to attract and retain crucial workers like teachers, firefighters, police officers, nurses, and construction workers. Workers in these occupations, however, often fall in between 80-120% of AMI and have limited housing options. When “Missing Middle” housing is actually built – it is often in the form of a few units within a building – not at the scale necessary to house these workers.

SB 336 expands the welfare tax exemption for low-income affordable rental housing units at or below 80% of AMI to include moderate-income rental units up to 120% of AMI that serve California’s middle-income workforce. Expanding this tax exemption would significantly increase the private market’s ability to finance and deliver “Missing Middle” housing throughout the state.

SB 336 is sponsored by Daniel Lurie, Mayor of the City and County of San Francisco, and the Housing Action Coalition.

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