Recently, Gov. Gavin Newsom signed Senate Bill 747 and Assembly Bill 480 into law to make common-sense revisions to the Surplus Lands Act that provide clarity and additional flexibility to public agencies and private developers.
What is the Surplus Lands Act, and why do we have it?
Especially in California, land availability and affordability is a factor in the state’s housing crisis. As a result, in 1968, the California Legislature enacted the Surplus Lands Act (“Act”), which aims to increase the availability of real property in California for affordable housing development by requiring the prioritization of affordable housing when disposing of public lands no longer necessary for agency use. The Act serves this purpose by imposing requirements on public agencies disposing of land that in turn essentially grants affordable housing developers a priority right to acquire the land. Some other groups (e.g., school districts, parks and recreation districts, etc.) also have priority rights, but affordable housing developers have the highest priority.
Recent legislation and regulations have significantly broadened the scope of the Act. Most notably, AB 1486 (2019-20) imposed various new requirements on public agencies disposing of surplus lands and also introduced penalties for noncompliant dispositions. Related guidance published by the Department of Housing and Community Development (HCD) further expanded the scope of the Act by purporting to apply the Act to leases.
While the expanded version of the Act can be a great tool for developers looking to acquire land for affordable housing, it also severely hinders the ability of public agencies to freely dispose of and obtain market value rates for their lands. Fortunately, Senate Bill 747 and Assembly Bill 480—which were just signed into law by Gov. Newsom—provide some much-needed flexibility for public agencies.
What is Senate Bill 747’s impact on the Surplus Lands Act?
Senate Bill 747 is a clean-up bill that was just signed into law by Gov. Gavin Newsom. Some of the key impacts of this bill include:
- Statutory confirmation that the Act does not apply to leases of 15 years or less. This is a major improvement from HCD’s current regulations which purport to apply the Act to leases of as little as five years (subject to some exceptions).
- New categories of “exempt” surplus land, including land owned by public-use airports, certain lands owned by agencies whose primary mission relates to public transportation, and certain lands transferred to community land trusts, are all more particularly set forth in the Act.
- Clarification that valid legal restrictions for purposes of determining whether land is “exempt” surplus land include contractual rights agreed to prior to Sept. 30, 2019, that prevent the use of the property for housing.
What is Assembly Bill 480’s impact on the Surplus Lands Act?
Assembly Bill 480 recognizes that the selling and leasing of publicly owned land is a long, drawn-out process and provides public agencies with an extended timeline to take advantage of a special exception to the Act. For public agencies that entered into an exclusive negotiating agreement (ENA) prior to the passage of AB 1486, AB 480 allows those agencies to comply with the pre-AB 1486 version of the Act for such dispositions (the “ENA exception”). This is helpful because the prior version of the Act was much less stringent.
Prior to the passage of AB 480, the deadline to utilize the ENA exemption was Dec. 31, 2022. This means that if an agency and a developer (or other entity) were party to an ENA prior to the passage of AB 1486 but failed to complete the contemplated disposition by Dec. 31, 2022, then the ENA was essentially deemed null and void, and the agency was forced to comply with the new version of the Act (thereby completely disregarding the contractual rights of not only the agency but also the developer or other third-party). Now, the deadline to utilize the ENA exemption has been extended to Dec. 31, 2027, which means that any of these “dead” ENAs will be revived, and the parties to the ENA can move forward with their contemplated transaction.
What do these bills mean for public agencies and private developers?
Now that these two bills have been signed into law, public agencies will benefit from much-needed additional flexibility in disposing of surplus lands by expanding what constitutes exempt surplus land and clarifying what qualifies as a valid legal restriction. Public agencies should carefully review the new Act when considering their options for disposing of surplus lands to make sure they are utilizing the best path for their agency.
Private developers that saw their ENAs with public agencies die as a result of AB 1486 now have their contractual rights restored (at least until Dec. 31, 2027). Private developers should keep in mind that the Act essentially grants them priority rights to acquire public lands for housing and should keep up to date on public lands opportunities, including via the Housing and Local Land Development Opportunity Map, which “serves as the repository for information and tools related to housing and local land development opportunities on public and privately owned sites zoned (or eligible to be rezoned) for residential use.”
THIS DOCUMENT IS INTENDED TO PROVIDE YOU WITH GENERAL INFORMATION REGARDING THE SURPLUS LANDS ACT. THE CONTENTS OF THIS DOCUMENT ARE NOT INTENDED TO PROVIDE SPECIFIC LEGAL ADVICE. IF YOU HAVE ANY QUESTIONS ABOUT THE CONTENTS OF THIS DOCUMENT OR IF YOU NEED LEGAL ADVICE AS TO AN ISSUE, PLEASE CONTACT THE ATTORNEYS LISTED OR YOUR REGULAR BROWNSTEIN HYATT FARBER SCHRECK, LLP ATTORNEY. THIS COMMUNICATION MAY BE CONSIDERED ADVERTISING IN SOME JURISDICTIONS. THE INFORMATION IN THIS ARTICLE IS ACCURATE AS OF THE PUBLICATION DATE. BECAUSE THE LAW IN THIS AREA IS CHANGING RAPIDLY, AND INSIGHTS ARE NOT AUTOMATICALLY UPDATED, CONTINUED ACCURACY CANNOT BE GUARANTEED.