Why California Teachers Will Celebrate Senate Bill 1413

Law360, New York (September 19, 2016, 11:57 AM EDT) – This past August, state legislators passed Senate Bill 1413, authorizing school districts to establish programs aimed at helping teachers and school district employees secure affordable housing. Authored by state Senator Mark Leno, whose district includes San Francisco, the purpose of SB 1413, known as the “Teacher Housing Act of 2016,” is to “facilitate the acquisition, construction, rehabilitation, and preservation of affordable rental housing for teachers and school district employees to allow teachers or school district employees to access and maintain housing stability.” SB 1413 does so by permitting school districts to build rental housing on district-owned property and restricting occupancy in these projects to teachers and school district employees. The bill, supported by teachers’ organizations, the California Apartment Association, and the Non-Profit Housing Association of Northern California, easily passed both the state Senate and Assembly and is now with Governor Jerry Brown for approval.

To appreciate the timeliness of SB 1413, it is important to understand its backdrop. California’s public education system serves an estimated 6.2 million students annually. The state’s 1,022 public school districts employ approximately 295,000 teachers tasked with educating these students, at every level, and across a variety of programs. In view of this, SB 1413’s promoters recognized the corresponding “high value” that Californians place on their public education system, finding that “the stability of housing for teachers and school district employees is critical to the overall success of each school in California.” That is, without housing they can afford, teachers will leave their schools or exit the profession entirely. This in turn may negatively affect students’ outcomes.

In support of this conclusion, SB 1413’s authors found that the number of new preschool through grade 12 teachers has hit a “12-year low,” while simultaneously, fewer people than ever before are enrolling in programs to become teachers. School districts today confront an average annual rate of attrition of 8%. The rate of attrition is comprised in part of teacher retirements, as “fully one-third of California teachers are over 50 years of age and 10 percent are over 60 years of age.” According to SB 1413’s backers, however, most of the attrition is due to younger teachers leaving the profession.

Unfortunately, as more teachers leave schools to find employment in other, higher-paying sectors, school districts’ demand for qualified teachers is not expected to decrease. This problem is even more pressing in those communities with high-cost housing markets, where the demand for qualified teachers will continue to outstrip supply.

Moreover, as school districts continue to recover from a years-long recession, programs and positions will be restored, leaving vacancies that districts must refill. Without a pool of teachers to draw from, schools — and by extension, students — will suffer. Furthermore, teacher attrition injures school districts’ financial bottom lines where, as here, many districts incur immense costs to recruit, hire and train new teachers.

The legislature’s research identified the lack of affordable housing as one driving factor in the shortage of qualified teachers. SB 1413 attempts to remedy this issue.

A New and Innovative Approach

SB 1413 provides school districts with mechanics to construct affordable rental housing on district-owned or nearby property that may be occupied solely by those persons “employed by a unified school district maintaining prekindergarten, transitional kindergarten, and grades 1 to 12, inclusive, an elementary school district maintaining prekindergarten, transitional kindergarten, and grades 1 to 8, inclusive, or a high school district maintaining grades 9 to 12, inclusive, including, but not limited to, certified and classified staff.” Put differently, SB 1413 grants school districts the power to build rental housing that only their own teachers and staff may occupy.

SB 1413 empowers school districts “to the extent feasible … establish and implement programs that … (a) leverage federal, state, and local public, private, and nonprofit programs and fiscal resources available to housing developers; (b) promote public and private partnerships; and (c) foster innovative financing opportunities.” Funding, of course, is probably the single biggest driver of whether school districts will actually utilize SB 1413 to undertake new projects. SB 1413, by its express language, offers financing options that school districts can use in partnership with the private sector, which is the bill’s most attractive feature.

In this way, an integral component of SB 1413 is the federal Low-Income Housing Tax Credit (LIHTC).” LIHTC programs facilitate the acquisition and rehabilitation or new construction, through private funds, of rental housing for low-income households, provided that this housing is made available to the “general public.” While projects under SB 1413 are not available to the “general public,” the act takes advantage of an Internal Revenue Service exception to the LIHTC program allowing its use for projects used by “members of a specified group under a federal program or state program or policy that supports housing for such a group,” in this case teachers and school district employees.

Opening Avenues to Creative Financing for Teacher Housing

SB 1413’s relevance to the construction industry is readily apparent. It incentivizes development by providing the construction industry with express statutory authority and opportunity to work creatively with school districts to access financing options or enter into strategic partnerships with the goal of constructing affordable rental housing for teachers and school district employees. According to one of SB 1413’s prominent sponsors, San Francisco Mayor Ed Lee, housing developers will not build projects that are not available to the general public without an express grant of statutory authority. [1] SB 1413 provides that authority.

Specifically, private builders will be able to access both federal and state LIHTCs to use toward new construction of affordable rental housing projects. Additionally, SB 1413 facilitates public-private partnerships, which are gaining in popularity as public entities struggle to find funding sources and must look outside traditional sources. A public-private partnership, known as a “P3,” is a contractual arrangement between a public agency (federal, state or local) and a private sector entity. [2] Through their P3 agreement, the skills and assets of the public and private sectors are shared in delivering a service or facility for the use of the general public. In addition to the sharing of resources, each party shares in the risks and rewards potential in the delivery of the facility. [3]

A Step in the Right Direction 

As pointed out by Senator Leno, “students and the community at large are benefited by teachers living in the community in which they practice their profession. It ensures stability, community involvement, and stronger ties between teachers and their students and families.”[4] By removing barriers to the development of housing built specifically for teachers and school district employees, SB 1413 signals state-level commitment to helping teachers manage their housing expenses, thereby ensuring they stay a part of what all Californians agree is “a vital profession.”[5]

Based on the authors’ experience, similar projects aimed at other public employees have served the public entities, their employees, the construction industry and ultimately, the public, well. The public entities are able to secure a more stable and dedicated work force. The employees are able to obtain housing in the communities where they work. And through the implementation of creative public-private partnerships, the construction industry is provided new opportunities for developments that might otherwise not exist. All of this results in a net gain to the public and its important public school educators.

—By Gregory J. Korbel and Rosanna E. Moreno, Miller Morton Caillat & Nevis LLP

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

[1]Sen. Com. on Transportation and Housing, Rep. on Teacher Housing (April 2016), p. 1; see also Sen. Com. on Appropriations, Rep. on Teacher Housing Act of 2016 (May 2016), p. 2.

[2]National Council on Public-Private Partnerships, available at http://www.ncppp.org/ppp-basics/7-keys/.

[3]Id.

[4]Sen. Com. on Transportation and Housing, Rep. on Teacher Housing (April 2016), p. 2.

[5]Id.