U.S. Department of Housing and Urban Development | Office of Policy Development and Research

Redevelopment Agencies in California: 

History, Benefits, Excesses, and Closure

Casey Blount

Wendy Ip

Ikuo Nakano

Elaine Ng

Working Paper No. HF-019

THE GSEs’ FUNDING OF AFFORDABLE LOANS: 

A 2004-05 UPDATE 

Harold L. Bunce 

December 2012 

Office of Policy 

Development 

and Research 

Housing Finance 

W O R K I N G P A P E R S E R I E S

U.S. Department of Housing and Urban Development 

Economic Market Analysis

January 2014

Working Paper No. EMAD-2014-01
Redevelopment Agencies in California: History, Benefits, Excesses, and Closure

Economic Market Analysis Working Paper Series 1

Effective February 1, 2012, the State of California ceased operating local redevelopment agencies (RDAs), which had operated 

since the end of World War II. In recent times, these agencies 

served as an important component of the affordable housing 

development landscape in California. This paper, developed 

by the U.S. Department of Housing and Urban Development’s 

(HUD’s) Office of Policy Development and Research (PD&R), 

examines the history of California’s RDAs, describes their successes and failures, and addresses the anticipated effects of their 

shut down on the future of affordable housing development in 

California. The first section of the paper traces the history and 

development of RDAs from their inception in 1945 through the 

legislative fight that dissolved them in 2011. The next section 

presents examples of the RDAs successes and failures over the 

years. The third section examines the RDAs closures and the 

anticipated impact that the closures will have on affordable 

housing development. The final section of this paper details 

how the closure of RDAs will affect affordable housing production in the cities of Los Angeles and San Jose.

RDAs in California: History

The history of RDAs in California dates to the California State 

Legislature’s passage of the Community Redevelopment Act in 

1945. The act provided the mechanism to create RDAs; however, most of the agencies relied on federal funding1

 until 1952, 

when Proposition 18 established “tax-increment financing.” 

Under the new financing structure, cities and counties were 

given the authority to declare areas as blighted and in need of 

urban renewal, at which time a city or county was allowed to 

distribute most of the growth in property tax revenue for the 

project area to the relevant RDAs as tax-increment revenues.

Although Proposition 18 created additional flexibility regarding 

funding RDAs, distribution of property tax revenues remained 

a zero-sum game for cities and counties, because revenue 

given to one agency—for example, giving money to a school 

district—reduced the amount that remained available for other 

agencies. This dynamic resulted in few identified project areas 

during the 1950s and 1960s. Likewise, project areas that were 

identified during the period typically consisted of 10 to 100 

acres, which was a relatively small project compared with 

later projects. The number and size of project areas were also 

restricted by the authority of local governments to raise funds 

from other sources. For example, at the time, the Constitution 

of the State of California allowed local governments to raise 

local taxes, both property and otherwise, without local voter 

approval. Cities and counties also had wide authority to impose 

fees and assessments. These additional revenue sources allowed 

local governments, if they desired, to perform redevelopment of 

areas that may have otherwise been deemed RDA-project areas 

without identifying them as such. As of 1966, 27 project areas 

had been identified within the state.

Redevelopment expanded in the number and size of project 

areas in the 1970s and 1980s, in large part because of two 

major state policy changes. The first, passage of Chapter 1406, 

Statutes 1972 (Senate Bill [SB] 90), created a system of school 

“revenue limits” that guaranteed each school district an overall 

level of funding via a combination of local property taxes and 

state resources. In short, the state assumed responsibility for 

funding local school districts up to the revenue limit if the revenue shortfall resulted from lack of growth in local property-tax 

income (whether because of redevelopment issues or for other 

reasons). This revenue limit effectively eliminated the zero-sum 

game for cities and counties regarding distribution of local 

property taxes and, in so doing, generated a significant incentive for cities and counties to create and expand RDA-project 

areas. By 1976, the number of project areas in the state had 

increased to 229. RDAs received 2 percent of total statewide 

property taxes in 1977.

The second policy change occurred in 1978 when Proposition 13 

capped the general-purpose property tax rate at 1 percent, while 

also constraining local authority over many other local revenue 

sources. Much like SB 90, which reduced the burden on cities 

and counties to provide funding for local schools, Proposition 13 

incentivized use of property-tax income for redevelopment by 

limiting the options available for local governments to otherwise 

finance redevelopment projects. In combination, the two policies 

inspired cities (and some small counties) to loosen their definitions of project area. In many cases, the definition of “project 

areas” was expanded to encompass hundreds or thousands of 

acres of land. During the period, at least two cities identified 

all privately owned land as within one project area or another 

1

 Primarily via programs of the Housing and Home Finance Agency, HUD’s immediate predecessor.

Redevelopment Agencies in California:

History, Benefits, Excesses, and Closure
Redevelopment Agencies in California: History, Benefits, Excesses, and Closure

Economic Market Analysis Working Paper Series 2

while other jurisdictions placed farmland under the redevelopment umbrella. The adoption of Assembly Bill (AB) 322 in 1983 

prohibited the previously common practice of defining project 

areas that included large amounts of vacant land; however, the 

number of project areas had still expanded to 594 by 1988, when 

RDAs received 6 percent of total statewide property taxes collected that year.

In response to concerns that redevelopment was expanding at 

the expense of other local programs as well as increasing the 

state’s costs for K–142

 education, state lawmakers, with increasing urgency, attempted to constrain local governments’ use of 

redevelopment funds from the 1980s through 2011. During 

the period, the California State Legislature enacted laws aimed 

at, among other things, strengthening regulations regarding 

the percentage of tax-increment revenues that RDAs used to 

develop housing for low- and moderate-income households. 

Passed in 1993, AB 1290 tightened the definition of a “blighted 

area” to “an area that is predominately urbanized and where 

certain problems are so substantial that they constitute a serious physical and economic burden to a community that cannot 

be reversed by private or government actions, absent redevelopment.”3

 AB 1290 also limited the ability of RDAs to subsidize 

or assist auto dealerships, large volume retailers, and other 

sales tax generators, and it eliminated the authority of RDAs 

to negotiate so-called “pass-through payments,” or payments 

made by RDAs to other local agencies, often to help settle 

disputes concerning the legality of proposed project areas. After 

the enactment of AB 1290, these pass-through payments were 

determined using a formula based on each local agency’s share 

of the property tax rate in the project area. Many redevelopment projects were not affected by the changes, however, as 

the restrictions applied only to new project areas (with existing 

projects lasting as long as 50 years). Likewise, despite the more 

specific language regarding “blight” and “developed land”4 in 

AB 1290 (as well as in 2006’s SB 1206), RDAs continued to 

establish new large project areas.

On nine occasions between 1992 and 2011, the state also 

attempted to require RDAs to shift some of their revenue to 

schools via countywide accounts known as ERAF (Education 

Revenue Augmentation Funds) or SERAF (Supplemental 

Educational Revenue Augmentation Funds). These attempts 

were severely hampered in 2010, however, when state voters 

approved Proposition 22, which limited the state’s authority 

over redevelopment and prohibited new state laws requiring 

RDAs to shift funds to schools or other agencies. Despite 

substantial efforts by the state to limit and refine the focus of 

redevelopment spending, RDAs received 12 percent of statewide property tax revenue in 2008, with six redevelopment 

projects that exceeded 20,000 acres in size.

New efforts to reduce the footprint of RDAs began shortly after 

the passage of Proposition 22 because the Governor’s 2011–12 

budget (SB 77) called for the dissolution of RDAs and redistribution of property tax revenue to, among other things, paying 

previously accrued redevelopment debts and offsetting $1.7 

billion of state general funds costs. In March 2011, however, 

SB 77 fell one vote short of the two-thirds majority required for 

approval by the state legislature. Following the failed vote, the 

legislature evaluated modified versions of the Governor’s initial 

proposal and, in June 2011, enacted two pieces of legislation. 

The first, Assembly Bill passed in the first extraordinary session 

(ABX1) 26, imposed an immediate freeze on RDAs’ authority, 

dissolved RDAs (effective October 1, 2011), and outlined the 

process by which RDAs would be wound down. The second, 

ABX1 27, introduced a program by which RDAs could avoid 

the dissolution implemented by ABX1 26 by making annual 

payments to local school districts, thereby offsetting much of 

the fiscal impact of redevelopment on the state budget.

Consistent with the history of attempts to limit the authority 

of RDAs, ABX1 26 and ABX1 27 were immediately met with 

resistance. Less than 3 weeks after the bills were signed, the 

California Redevelopment Association (CRA) and the League 

of California Cities challenged the constitutionality of the 

legislation. In addition, in an attempt to avoid repercussions 

if the legislation were enacted, many RDAs began issuing 

unprecedented amounts of debt. In fact, despite paying higher 

borrowing costs than ever before, RDAs issued more debt in 

the form of tax allocation bonds during the first 6 months of 

2011, approximately $1.5 billion, than they had in all of 2010, 

$1.3 billion. RDAs also rushed to transfer assets to other local 

agencies to suppress the level of funds that could be taken by 

the state via ABX1 26.

In December 2011, the Supreme Court of California upheld 

ABX1 26, supporting the legislature’s authority to dissolve 

entities that it created (in this case, RDAs). The court, however, 

found ABX1 27 to be unconstitutional because it violated 

2

 For budgetary purposes, “K–14 education” refers to the sum of kindergarten, grades 1 through 12, and public community colleges.

3

 Assembly Bill 1290, Community Redevelopment Law Reform Act of 1993, Section 3.b.

4

 Assembly Bill 1290, Community Redevelopment Law Reform Act of 1993, Section 7.5.
Redevelopment Agencies in California: History, Benefits, Excesses, and Closure

Economic Market Analysis Working Paper Series 3

Proposition 22’s prohibition against the state’s forcing RDAs 

to share money with other local agencies. In combination, the 

court’s rulings left all RDAs subject to the process described in 

ABX1 26.

Per ABX1 26, RDAs officially lost “all authority to transact business or exercise power”5

 on February 1, 2012, with successor 

agencies (in most cases the cities and counties in which the 

RDAs operated) becoming responsible for the winding down of 

the dissolved RDAs. The successor agencies were tasked with 

terminating or renegotiating former RDAs’ contracts, collecting 

revenues due to the dissolved RDAs and making payments required of those RDAs, and “expeditiously” disposing of former 

RDAs’ assets “in a manner aimed at maximizing value.”6 Proceeds 

accrued by successor agencies that were not needed to meet 

previous RDA obligations were required to be distributed to 

other local agencies as property tax revenue. In addition, to 

help offset the behavior of many RDAs after the announcement 

of ABX1 26, but before the Supreme Court’s ruling, assets that 

were transferred after January 1, 2011, were also used to cover 

payment obligations or were distributed as property taxes if 

the state controller determined the transfer as not contractually 

committed to a third party. Successor agencies, however, were 

allowed to retain housing functions and assets previously held 

by the RDAs, with the exception of each RDA’s Low and Moderate Income Housing Fund (LMIHF).

Before the enactment of ABX1 26, the state mandated that each 

RDA allocate at least 20 percent of its annual tax-increment 

revenues into LMIHF, ostensibly to improve and expand the 

availability and supply of affordable housing in the respective 

RDA; however, many RDAs had simply accrued substantial balances in their housing funds. As of fiscal year (FY) 2009–10, in 

fact, reports submitted to the California Department of Housing 

and Community Development (CA HCD) showed that the unencumbered portions of RDAs’ housing funds totaled as much 

as $2.2 billion. ABX1 26 dictates these funds be distributed to 

schools, counties, and other local agencies.

Although the dissolution of RDAs will not decrease the level 

of taxes paid by property owners, it will result in additional 

property tax revenues being distributed to other local agencies, 

including cities, counties, and schools. In turn, the additional 

revenue will substantially reduce the amount of state revenue 

required to finance the K–14 education program. This 

reduction could prove a boon to state taxpayers, but it raises 

some questions concerning the future of redevelopment in 

the state, particularly regarding affordable housing. The state 

currently has several agencies that are at least partially aimed at 

providing housing for low- and moderate-income households, 

including the California Tax Credit Allocation Committee, 

which administers low-income housing tax credit (LIHTC) 

programs in the state; the CA HCD, which provides grants 

and low-interest loans to developers of affordable housing 

via state general obligation funds; and the California Housing 

Financing Agency, which assists first-time homebuyers with 

low-interest mortgages and loans as well as helping to finance 

the development of multifamily rental housing through the sale 

of tax-exempt mortgage revenue bonds and associated LIHTCs. 

Likewise, existing laws present local governments some options 

for acquiring financing for redevelopment projects, including 

business improvement districts, infrastructure financing 

districts (IFDs),7

 and property tax overrides. No longer is there 

any requirement that increased property tax revenues be used 

for redevelopment, however, much less affordable housing, 

which could provide an obstacle for future redevelopment 

efforts.

RDAs in California: Benefits 

and Excesses

Some RDAs were able to attract businesses to previously 

depressed areas and undertake the cleanup of contaminated 

areas. For example, the city of Emeryville’s industrial decline 

during the 1980s left the area with acres of contaminated 

land from a sulfur/insecticide plant, pigment plant, and steam 

drum-cleaning operation. The previous industrial owners were 

unwilling to proceed with redevelopment plans of the area 

because of the significant toxic cleanup costs. The city’s RDA 

led cleanup efforts in the area now known as Bay Street and 

provided 400,000 square feet of new retail and entertainment 

space, creating approximately 940 new jobs and 375 new 

residential units above retail space in mixed-use buildings; 20 

percent of the residential units are affordable at the very lowincome level.8

In another example, in the city of Vista’s downtown center, 

Vista Village, businesses began to close and the infrastructure 

deteriorated as the area underwent an economic decline. Former 

5

 Assembly Bill X1 26, Chapter 2, Section 34172.b (California, 2011).

6

 Assembly Bill X1 26, Chapter 4, Section 34181.b (California, 2011).

7

 San Francisco County is the only county in California that is allowed to have IFDs overlap former RDAs.

8

 CRA (2010).
Redevelopment Agencies in California: History, Benefits, Excesses, and Closure

Economic Market Analysis Working Paper Series 4

businesses left behind soil and ground water contamination. The 

city’s RDA spent more than $1 million to clean up the areas 

during the last half of the 1990s. The redevelopment project 

also made improvements to the existing Main Street, which 

included a new park-like, open-space area called Creekwalk 

Park. As a result of the project, the area added more than 40 

new businesses and roughly 700 new jobs and encouraged 

more than $55 million in private investment in the project.9

The University Village community in the city of Riverside 

provides yet another example. The city’s RDA transformed the 

high-crime area, which included an abandoned auto dealership 

and gas station, into a mixed-use development that attracts 

University of California-Riverside students and community 

residents. The University Village Redevelopment Project generated more than $75 million in private investment, created 600 

jobs, and led to the construction of student housing units and 

student parking lots.10

In addition to helping with the cleanup of previously contaminated areas, RDAs helped fund the construction of new 

affordable housing units. The city of Sacramento’s RDA helped 

transform the crime-ridden Franklin Villa apartments into the 

Phoenix Park Apartments, with 360 units of affordable rental 

units. In 2000, construction began on 102 single-family homes 

in the Vista del Rio housing complex in the cities of Bell Gardens and Commerce. One-half of the units are affordable for 

low- to moderate-income families. The city of Riverside’s RDAs 

renovated a 64-unit housing complex located in the University 

neighborhood that is restricted to low- and moderate-income 

households. Other RDAs across the state have added to the 

stock of affordable housing units. According to data from the 

CA HCD, RDAs in the state created 63,600 new affordable 

housing units from FY 2001 through FY 2008. Figure 1 shows 

the breakdown of housing units by affordability level created 

by RDAs. During the 8-year period, approximately 44 percent 

of new housing units constructed by RDAs were affordable at 

the very low-income level (at or less than 50 percent of MFI).

In response to the Governor’s proposal to dissolve RDAs in 

the state, the Legislative Analyst’s Office (LAO) evaluated 

the performance of RDAs and found no evidence that RDAs 

improved overall economic development in California and that 

the program shifted funds away from necessary services, such 

as education.11 The Governor’s Office concluded that the private development that occurred in redevelopment project areas 

would have occurred without RDAs and that redevelopment 

only shifted projects from one area of the state to another.12

9

 CRA (2010).

10 CRA (2010).

11 CA LAO (2011).

12 California Governor’s Office (2011–12).

Figure 1. Affordable Housing Units Constructed From FY 2001 Through FY 2008

1,000

0

2,000

3,000

4,000

5,000

6,000

FY 2001

FY = fiscal year. MFI = Median Family Income.

Source: State of California Department of Housing and Community Development

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

Very low ≤ 50% MFI Low ≤ 80% MFI Moderate ≤ 120% MFI Above moderate > 120% MFI
Redevelopment Agencies in California: History, Benefits, Excesses, and Closure

Economic Market Analysis Working Paper Series 5

Although some RDAs succeeded in creating new affordable 

housing units, from FY 2001 through FY 2008, only 11 percent 

of the funds set aside in the LMIHFs were used for housing 

construction, according to data by CA HCD (figure 2). Of more 

than 430 RDAs in California, 101 spent at least $100,000 of 

their LMIHF budget but did not build a single unit during the 

8-year period.13 For example, the city of Santa Ana’s RDA spent 

$22 million to purchase and demolish homes in the east side of 

town, displacing low-income residents without replacing any 

units. The city originally planned to build newer apartments 

and townhomes in the area, but a plan was never adopted for 

the site. The area is now filled with abandoned homes and vacant lots without any new development.14 The city of Irwindale 

likewise spent $87 million from FY 2001 through FY 2008 and 

produced only 42 new homes and 62 rehabilitated units. The 

RDA spent a portion of the funds to acquire industrial land 

next to an old gravel pit and warehouses, which the city now 

concedes was unsuitable for housing.15

Not only have some RDAs been unable to produce affordable 

housing units, others have invested in retail projects that ultimately failed to produce the sales tax revenues anticipated as a 

result of retailers leaving the area. The city of Costa Mesa used 

$62 million of RDA funds and eminent domain to clear out 

several existing businesses for the construction of the Triangle 

Square Mall, located in the city’s downtown. The project was 

expected to pull in $1 million in sales tax revenues annually, 

but, in 2004, the city collected only one-fifth of the anticipated 

revenues, at $200,000. The mall is now largely vacant, because 

many of its anchor tenants, including Niketown, Virgin Megastore, and Barnes and Noble, left.16 A similar situation occurred 

in the city of Indio, which planned to expand the Indio Fashion 

Mall, which had been losing traffic to the trendier Westfield 

Shoppingtown Mall in Palm Desert. After the city demolished 

80 homes, several stores, and a low-income housing project, 

plans for the expansion with the original developer fell 

through. The mall continues to lose business, with many tenants unable to make even a single sale in a day.17

13 Christensen, et al. (2010).

14 Castle Coalition (2011). 

15 Christensen, et al. (2010). 

16 Castle Coalition (2006).

17 Pena (2008).

Figure 2. RDA Spending, FY 2001 Through FY 2008

Source: State of California Department of Housing and Community Development 

Property acquisition, 20.1%

Homebuyers assistance, 13.1%

Debt service, 28.6%

Housing construction, 11.2%

Rehabilitation and maintenance, 13.6%

Planning and administrative, 13.4%
Redevelopment Agencies in California: History, Benefits, Excesses, and Closure

Economic Market Analysis Working Paper Series 6

RDAs in California: Closure

The Anticipated Impact of Closure on 

Affordable Housing Development

The closure of RDAs across California and the removal of RDA 

financing for affordable housing developments are expected 

to reduce the number of new affordable housing units in the 

foreseeable future if current financing structures and incentives 

for affordable housing development prevail. No approved 

measures currently allow for an equivalent statewide set-aside 

fund exclusively for providing future affordable housing after 

all existing obligations are met by the successor agencies.18

Several bills have been proposed following ABX1 26 to mitigate 

the impact of RDA closures, however. AB 1585, approved in 

September 2012, extends the use of monies in the LMIHF by 

the successor agency for the purpose of funding administrative 

and planning costs relating to existing enforceable obligations. 

The amount of existing monies in the LMIHF needs to be 

expended or encumbered by 2015 because, after 2015, the 

uncommitted funds will be transferred to the CA HCD for lowincome housing programs.

Measures that would allow for the creation of districts or 

areas for redevelopment, including the development of affordable housing, and for the collection of funds to support 

that development were introduced, but they were either 

vetoed or failed to pass the Assembly or the Senate. These 

proposed measures include SB 1156, AB 2144, and SB 1151. 

SB 1156 proposed the creation of Sustainable Community 

Investment Areas and a tax-increment collection to support 

project construction. AB 2144 proposed housing development 

through a Redevelopment Property Tax Trust Fund. SB 1156 

and AB 2144 were vetoed during 2012. SB 1151 proposed the 

formation of new redevelopment agencies, allowing access to 

RDA assets with a focus on sustainable communities; however, 

the bill failed to pass through the Assembly Committees on 

Housing and Community Development and Local Government 

toward the end of 2012.

Despite the difficulties for restoring RDA-like functions on a 

statewide level, San Francisco has set a precedent in providing 

new, affordable housing development through revisions of its 

IFDs. By state law, IFDs typically may not overlap any former 

RDA’s project area. San Francisco has been largely able to 

modify existing laws because of its county-city distinction. The 

legal revisions of the IFDs in San Francisco have allowed for 

the designation of IFDs on a formerly designated RDA’s project 

area, with funds allocated, in part, to developing affordable 

housing through tax increments. In addition, the approval of 

Proposition C in San Francisco in November 2012 created a 

San Francisco Housing Trust Fund that would set aside revenues, starting in FY 2013, to create, acquire, and rehabilitate 

affordable housing and to promote affordable homeownership 

programs in the city through 2043. It also authorized the 

development of up to 30,000 affordable rental units in San 

Francisco.

While the impact of RDAs’ closures will be mitigated in San 

Francisco as a result of the approved ballot measure, municipal 

and county officials expect that both agency-specific affordable 

housing developments and developments using other sources 

of primary funding throughout California will be affected by 

the RDAs’ closures. RDAs’ financing and the incentives under 

AB 3674, passed in 1976 by the California State Legislature, 

supported the development of affordable housing. Under 

AB 3674, at least 20 percent of the RDAs’ tax-increment funds 

needed to be allocated to the LMIHF. During the past 6 years, 

the minimum 20 percent under AB 3674 translated into approximately $1.02 billion annually that was set aside for the 

development of affordable housing, according to the California 

State Controller’s Office.19

Existing RDA housing developments under the RDA dissolution process will be funded through the LMIHF. All former 

RDA developments that are currently under construction and 

developments that have enforceable agreements, as proposed 

by the successor agencies and as approved by the California 

Department of Finance, will be funded to completion as an 

enforceable obligation out of the LMIHF. In all cases, developments that are enforceable obligations need to have been 

approved by the RDA by December 31, 2010. Any development that was submitted after December 31, 2010, will not 

be eligible for funding through the successor agency and the 

LMIHF.

RDA financing also served as gap financing for projects that 

had LIHTC and HUD Section 108 Loan Guarantee Program 

18 Existing affordable housing obligations will be financed through the Low and Moderate Housing fund; however, after all existing obligations are met, any 

remaining amount in the fund be transferred back to a general state tax collection.

19 Some RDA areas had set the percentage of their tax increment higher than the minimum 20 percent. For example, the former Anaheim RDA had allocated 

30 percent of the tax increment to the Low and Moderate Income Housing Fund.
Redevelopment Agencies in California: History, Benefits, Excesses, and Closure

Economic Market Analysis Working Paper Series 7

financing under the Community Development Block Grant 

(CDBG) program.20 The closure of RDAs is expected to impact 

housing provided through the LIHTC program, because developers of affordable housing frequently used RDA financing to 

fill funding gaps in LIHTC or tax-exempt bond developments. 

According to the California Tax Credit Allocation Committee, 

62 percent of all 9-percent LIHTC awards also had RDA 

financing during the 2011 awards round.21 The closure of the 

RDAs is expected to reduce the number of projects competing 

for LIHTCs in coming years, but the exact amount is uncertain 

at present. In addition, according to former RDA jurisdiction 

personnel, CDBG and HOME funding was often used to 

finance the upfront costs associated with an affordable housing 

development; however, RDA financing would fill the financial 

gap to ensure the project’s completion.

Statewide, RDAs were planning to construct approximately 

12,050 units during a 2-year period from January 2012 to 

December 2013, according to data from Housing California 

and the California Housing Consortium. Housing California 

is a statewide nonprofit organization representing a coalition 

of advocates for affordable housing and homeless issues. The 

California Housing Consortium is a nonpartisan group of developers, builders, financial experts, and public sector groups 

united to advance affordable housing and community development across California. Of the largest RDA areas22 that were 

surveyed in California, 4,525 units, or approximately 60 percent, 

of affordable housing that was proposed to complete construction 

within the year will not receive funding through the successor 

agency.

Taken together, the removal of RDAs as a source of funding 

for affordable housing development is expected to result in a 

statewide average annual loss of 4,500 to 6,500 new affordable 

units through the foreseeable future after all enforceable obligations have been met.23 This estimated annual loss represents a 

total that would likely have been delivered under RDA financing had the RDAs been allowed to continue and includes both 

agency-specific developments as well as developments that 

relied on RDA gap financing.

How Closure Will Affect Affordable 

Housing Production in Two Cities

The city of San Francisco was considered as a case study; 

however, the implementation of Proposition C is expected to 

greatly mitigate the adverse impact on the provision of affordable housing in the area following the RDA closures. 

Case 1: City of Los Angeles

Since 2000, the RDA in the city of Los Angeles has constructed 

approximately 300 units of affordable housing annually, accounting for nearly 20 percent of total affordable housing delivered in 

the city. RDA units have helped to house some of the 891,300 

households who reside in the city and who would qualify for 

low- to moderate-income housing. Since 2000, however, growth 

in the affordable housing market has not kept pace with growth 

in the number of low- to moderate-income households. The 

number of income-eligible households in the city has increased 

by an average of 17,050 households, or 2 percent, annually 

since 2000 compared with an increase in affordable housing 

units by an average of approximately 1,650 units annually. Approximately 75 percent of income-eligible households in the 

city are renters, or 672,300 renters. Growth in the number of 

income-eligible renter households has accounted for 67 percent 

of total growth in the number of low- to moderate-income households, increasing by an average of 11,500 households annually 

since 2000—a trend that is expected to continue during the 

foreseeable future.

According to Housing California and the California Housing 

Consortium, 827 RDA housing units are located in the city of 

Los Angeles that had been planned for completion over the next 

2 years, and which now are expected to not receive funding. 

The shortfall of planned affordable units from the RDA’s closure is expected to place pressure on low- to moderate-income 

households, because these households will continue to increase 

in number but the availability of new affordable housing will 

decline. Even with RDA assistance, new affordable units have 

been able to cover only 10 percent of the growth in the number 

of low- to moderate-income households. The closure of the 

20 The LIHTC and CDBG programs represent the largest existing programs in California that support affordable housing development. 

21 Awardees with RDA financing would include those RDA projects that have enforceable agreements (Pavão, 2011).

22 RDA cities surveyed were located in the following counties: Alameda, Contra Costa, Imperial, Los Angeles, Marin, Napa, Orange, Riverside, San Bernardino, San 

Diego, San Francisco, San Mateo, Santa Clara, Solano, Sonoma, and Ventura.

23 The annual estimate is based on cost-per-unit data from the CA HCD and tax-increment dollars from the California State Controller’s Office during the past 3 years. 

The range in total number of units depends on variations in the costs of construction and the amount set aside by former RDA jurisdictions.
Redevelopment Agencies in California: History, Benefits, Excesses, and Closure

Economic Market Analysis Working Paper Series 8

RDA is expected to reduce the number of new affordable units 

to a level that would cover only approximately 8 percent of the 

anticipated increase in the number of low- to moderate-income 

households.

Although the ratios are improving, the average gross rent-toincome ratios are still high. The average gross rent currently 

is as high as 43 percent of the maximum eligible household 

income and is 70 percent or more of income for households 

that earn 30 percent of the MFI. By comparison, during 2000, 

the average gross rent was as high as 46 percent of maximum 

eligible household income and was 80 percent or more of incomes for households that earn 30 percent of MFI. Since 2000, 

one-person, income-eligible households have experienced the 

highest cost burden, paying at least 40 percent of income in 

rent. The current number of one-person, income-eligible households has increased since 2000 by 15 percent, and these households currently account for 47 percent of all income-eligible 

households in the city compared with 37 percent of all eligible 

households during 2000. The prominence of one-person, 

income-eligible households as a proportion of total eligible 

households is expected to continue in the future.

Case 2: City of San Jose

The RDA in the city of San Jose has constructed approximately 

370 units of affordable housing annually since 2000, accounting 

for 23 percent of total affordable housing delivered in the city. 

These RDA units have helped to house some of the 116,100 

households who reside in the city and who would qualify for 

low- to moderate-income housing. As with the case for the city 

of Los Angeles, however, growth in affordable housing since 

2000 has not kept pace with growth in the number of low- to 

moderate-income households. The number of income-eligible 

households in the city has increased by an average of 1,350 

households, or 1.3 percent, annually since 2000 compared with 

an increase in affordable housing units by an average of approximately 1,225 units annually. Nearly 60 percent of incomeeligible households in the city are renters, or 66,300. Growth in 

the number of income-eligible renter households has accounted 

for 58 percent of total growth in low- to moderate-income households, increasing by an average of 780 households annually 

since 2000, a trend that is expected to continue during the 

foreseeable future.

A total of 1,096 RDA units were planned for construction in the 

city of San Jose during 2013 and 2014, however, most of these 

units are not expected to receive funding, according to data 

from Housing California and the California Housing Consortium. The shortfall of planned affordable units from the RDA’s 

closure is also expected to place pressure on low- to moderateincome households, because, as with the case for the city of Los 

Angeles, these households will continue to increase in number 

while the availability of new affordable housing declines. Even 

with RDA assistance, new affordable units have covered only 90 

percent of the growth in low- to moderate-income households. 

The closure of the RDA is expected to reduce the number of 

new affordable units to cover only approximately 80 percent of 

the increase in low- to moderate-income households.

In addition, the change in the designation of Difficult Development Areas (DDAs) for the purpose of the LIHTC under 

Section 42 of the Internal Revenue Code of 1986 by HUD for 

2013 is expected to further adversely affect the provision of 

new affordable housing units in San Jose. According to the 

city of San Jose Housing Department, as of March 2013, the 

city had 8 projects in the pipeline, with a combined total of 

725 affordable units. None of the projects currently have bond 

financing or tax credits. Of the 8 projects, totaling 177 units, 

2 are located in the redesigned Qualified Census Tracts (QCTs) 

and are being considered for bond financing. The remaining 

6 projects, comprising 548 affordable units, or 75 percent of 

the pipeline, will likely not be constructed as a result of the 

2013 designation of DDAs, which eliminated the San Jose metropolitan area from the list. These 6 projects would need both 

bond financing and additional sources of financing to fill the 

gap left by the closure of the RDA. Furthermore, the city of San 

Jose Housing Department reports that the 2013 QCTs for San 

Jose provide very few future housing opportunities within the 

identified growth areas outlined in the recently adopted general 

plan. The identified growth areas in San Jose are located along 

major transit corridors, near transit stations, on infill land, in 

the downtown core, and in northern San Jose, the employment 

center. Transit-oriented developments typically are more costly 

than nontransit-connected areas. With the movement to ensure 

that affordable housing is located near jobs, services, and local 

transit, the elimination of the DDAs in San Jose places further 

strain on the future availability of affordable housing.

Since 2000, the average apartment rent in the city of San Jose 

has declined, while the MFI has increased. According to data 

from Reis, Inc., the average market rent for apartments during 

the third quarter of 2012 decreased by an average annual rate 

of 0.7 percent from 2000, while the MFI in the greater Santa 

Clara County area has increased by an average of 2.0 percent 

annually during the same period. Despite the decline in average rents and increase in MFI, low-income households remain 

burdened. The average gross rent is currently as high as 38 percent of the maximum eligible household income and is at least 

69 percent of income for households that earn 30 percent of 
Redevelopment Agencies in California: History, Benefits, Excesses, and Closure

Economic Market Analysis Working Paper Series 9

MFI. By comparison, during 2000, the average gross rent was 

as high as 56 percent of maximum eligible household income 

and was 87 percent or more of incomes for households that 

earn 30 percent of MFI. As with the case for the city of Los 

Angeles, since 2000, one-person, income-eligible households 

have experienced the highest cost burden, paying nearly 40 percent of income in rent. Since 2000, the number of one-person, 

income-eligible households has increased by 16 percent, and 

these households have accounted for 57 percent of all incomeeligible households in the city, a trend that is expected to 

continue in the foreseeable future.

References

California Governor’s Office. 2011–12. Tax Relief and Local 

Government. Governor’s Budget Summary. Sacramento, CA: 

State of California.

California Legislative Analyst’s Office (CA LAO). 2011. Governor’s 

Redevelopment Proposal. Sacramento, CA: State of California.

California Redevelopment Association (CRA). 2010. Redevelopment Success Stories. Sacramento, CA: State of California.

Castle Coalition. 2006. Redevelopment Wrecks: 20 Failed Projects 

Involving Eminent Domain Abuse. Arlington, VA: Castle Coalition.

———. 2011. “Resources on Redevelopment in California.” 

http://www.castlecoalition.org (accessed September 17, 2013).

Christensen, Kim, et al. 2010. “How Is Your Redevelopment 

Agency Spending Money?” Los Angeles Times, October 3. http://

www.latimes.com (accessed September 17, 2013).

Pavão, William J. 2011. California Tax Credit Allocation Committee Presentation. http://www.treasurer.ca.gov (accessed 

September 25, 2013).

Pena, Xochitl. 2008. “Tough Times at the Indio Fashion Mall,” 

The Desert, July 5. http://www.mydesert.com (accessed September 25, 2013).