Governor Brown signed two bills which will provide direction as Cap and Trade revenue investment decisions are made in coming years. SB 535 (State Senator Kevin de León) and AB 1532 (Assembly Speaker John Pérez) create a framework for the state’s investment strategy for the funds which will be generated under the terms of California’s Global Warming Solutions Act (AB 32). SB 535 requires that a minimum of 10% of the investments of from the Greenhouse Gas Reduction Fund be targeted to identified neighborhoods, with one-quarter of the investment required to demonstrate a benefit to those communities.
AB 1532, creates the Greenhouse Gas Reduction Fund to hold the revenues from the Cap and Trade auction, and sets up a public process for development of investment plans, hearings, annual reporting and active oversight of the expenditure of those revenues. AB 1532 specifies 7 categories of investment for the Greenhouse Gas Reduction Fund, among them, “sustainable infrastructure projects, including transportation and housing.” With estimates of first year revenues in the $1 billion range, having access to this capital should be good news for housing developers, especially those who depend on subsides to produce below market rate housing, in light of the loss of redevelopment funding and exhaustion of the Housing Bond funds from Propositions 46 (2002) and 1C (2006).
But, will housing developers really get access to that capital in meaningful ways, or will the funds be invested in other activities? And should the funds be invested in housing, instead of other areas which would result in greater reduction in greenhouse gas emissions?
Housing location in general, and below market rate housing in particular, does not actually seem to provide much benefit to the primary strategy of addressing greenhouse gas emissions: reducing Vehicle Miles Traveled (VMT). While there are many tools available to reduce VMT, they have differing effects, and collocating below market rate housing with transportation systems and other uses has a very low pay off, according to the California Air Pollution Control Officers Association (CAPCOA). In the CAPCOA’s report Quantifying Greenhouse Gas Mitigation Measures, inclusion of below market rate housing is shown to have significantly less benefit than almost all other transportation related measures that might be used to reduce VMT.
So, faced with the mandate to reduce VMT in order to effectively slow and eventually reverse the growth in greenhouse gases, will the Cap and Trade funds be invested in below market rate housing? It remains to be seen.