Report 2021-114 Recommendation 12 Responses

Report 2021-114: State Surplus Property: The State Should Use Its Available Property More Effectively to Help Alleviate the Affordable Housing Crisis (Release Date: March 2022)

Recommendation #12 To: Housing and Community Development, Department of

To better promote development of affordable housing on local surplus land, HCD should, by January 2023, update its guidelines related to the local surplus property law to provide information on how it will assess and support good faith negotiations to mitigate the risk that local agencies may negotiate with developers in bad faith.

Annual Follow-Up Agency Response From October 2024

HCD published updated Surplus Land Act Guidelines on August 1, 2024. Section 202(a)(1)(C) of the updated Guidelines, which relates to the 90-day good faith negotiation period required in the statute, was revised to add that "the local agency must establish and document that good faith negotiations have taken place with each respondent" and that "HCD may request from local agencies a purchase and sale or lease agreement disposing of surplus land when good faith negotiations do not result in a disposition to an affordable housing entity." In addition, this section of the Guidelines now included a list of "[a]ctivities that demonstrate good faith negotiations," including, but not limited to, making a serious effort to meet at reasonable times and attempting to reach agreement, responding to letters of interest, responding to and considering reasonable offers to purchase or lease, not requiring that development proposals significantly deviate from the Notice of Availability, and not arbitrarily ending active negotiations after 90 days.

This additional documentation of the types of activities that a local agency has engaged in during the negotiation process, along with HCD's ability to request a purchase and sale or lease agreement, will deter local agencies from negotiating in bad faith with affordable housing developers. This will also allow HCD to identify situations where a local agency has not negotiated in good faith, prompting the local agency to re-engage with affordable housing developers, potentially resulting in more affordable housing on local surplus land.

California State Auditor's Assessment of Annual Follow-Up Status: Fully Implemented

1-Year Agency Response

HCD is in the process of updating the Surplus Land guidelines and has included further defining and clarifying "good faith negotiations" as an item to be addressed in the update.

The project schedule for the SLA Guidelines Revision process includes an internal review of needed changes (complete), drafting of a strike out and underline version of revisions (currently in progress), and a 30-day public comment and review period. The timeline for this project estimates a release of draft guidelines by April 2023.

California State Auditor's Assessment of 1-Year Status: Partially Implemented

HCD has made progress in updating its guidelines, and expects to release draft guidelines by April 2023.

Annual Follow-Up Agency Response From March 2023

HCD is in the process of updating the Surplus Land guidelines and has included further defining and clarifying "good faith negotiations" as an item to be addressed in the update.

The project schedule for the SLA Guidelines Revision process includes an internal review of needed changes (complete), drafting of a strike out and underline version of revisions (currently in progress), and a 30-day public comment and review period. The timeline for this project estimates a release of draft guidelines by April 2023.

California State Auditor's Assessment of Annual Follow-Up Status: Partially Implemented

HCD has made progress in updating its guidelines and expects to issue updated draft guidelines by April 2023.

6-Month Agency Response

HCD is in the process of updating the Surplus Land guidelines and has included further defining and clarifying "good faith negotiations" as an item to be addressed in the update.

The project schedule for the SLA Guidelines Revision process includes an internal review of needed changes, an external stakeholder engagement and review process, drafting of a strike out and underline version of revisions, and a 30-day public comment and review period. The timeline for this project estimates a release of final guidelines by April 2023.

California State Auditor's Assessment of 6-Month Status: Partially Implemented

HCD is in the process of revising its guidelines and expects to complete the update by April 2023.

60-Day Agency Response

HCD has developed a draft timeline/work plan and a list of changes (including this one) to include in the update, and it is currently developing and reaching out to a list of stakeholders to engage early in the process.

California State Auditor's Assessment of 60-Day Status: Pending

All Recommendations in 2021-114

Agency responses received are posted verbatim.