Surplus residential property: condition-adjusted price of the fair market value: Cities of Pasadena and South Pasadena

The law gives eligible tenants, former owners, and former tenants a clearer path to buy surplus homes in and around Pasadena and South Pasadena, while tying city resale proceeds to replacement affordable housing.

What the law does ​

• Requires eligible former owners, tenants, and former tenants to receive priority offers at a condition-adjusted price based on the property's October 13, 2019 value and qualifying deterioration.
• Requires Department of Transportation-paid appraisals and inspections, permits tenant-funded reviews, and requires written explanations when the department's final valuation materially differs.
• Allows eligible purchasers who cannot obtain enough primary financing to receive deferred-payment subordinate loans, with repayments deposited into the Affordable Housing Trust Account.
• Requires the Department of Transportation to provide requested sale, appraisal, condition, inspection, lease, rent, title, and environmental records without a nondisclosure agreement, after redacting private or privileged information.
• Exempts the selling agency from repair obligations for homes sold at the condition-adjusted price and assesses those homes for property-tax purposes at that price.
• Requires Pasadena and South Pasadena to use proceeds from reselling unoccupied homes to produce or acquire at least three affordable homes for each home acquired, subject to reporting, oversight, deadlines, and potential fines.
• Requires prevailing wages for covered construction connected to sales to housing-related entities or the two cities.

Who it affects ​

• Current and former tenants, former owners, and other eligible buyers of unsold State Route 710 surplus residential properties.
• The Department of Transportation, which must set depreciation rules, implement the changes through regulations, sell properties, and disclose records.
• The Cities of Pasadena and South Pasadena, which may buy eligible vacant homes and must meet affordable-housing production, reporting, and covenant-monitoring requirements.
• Housing-related entities, construction contractors, and workers involved in redevelopment of these properties.

Context ​

The law took effect immediately to keep pending and future surplus-home sales moving while the Department of Transportation updates its regulations.

Breakdown ​

New Pricing Rules for Surplus Homes ​

AB 2329 changes how certain surplus homes are priced when offered to former owners, current occupants, and eligible tenants. Instead of using the current appraised market value for the first-priority offer, the bill uses a condition-adjusted value tied to the home's October 13, 2019 market value and adjusted under the bill's rules. It also changes affordable-price calculations, sets inspection rules, allows purchase assistance, and directs certain repaid assistance funds to the Affordable Housing Trust Account.

Key takeaways

• First-priority buyers of eligible single-family surplus homes must be offered the property at a condition-adjusted fair market price rather than the ordinary appraised fair market value.
• The condition-adjusted fair market price starts with the property's fair market value as of October 13, 2019, as determined by an independent appraiser, and is adjusted under the bill's rules.
• The bill revises the rules used to calculate an affordable purchase price for eligible current occupants and tenants.
• The bill establishes requirements for property inspections, including rules concerning who performs them and who pays their cost.
• A selling agency does not have to make repairs to a surplus residential property sold at the condition-adjusted fair market price, subject to the bill's terms.
• Eligible current occupants or tenants who buy at an affordable or condition-adjusted price may receive purchase assistance, and specified repayments of that assistance must be deposited into the Affordable Housing Trust Account.

Tenant Sales and Adjusted Pricing ​

The bill changes the price that current and former tenants would pay when they have priority to buy surplus residential property. Instead of paying standard fair market value, they would buy at a condition-adjusted fair market value that reflects the property's condition. The bill also requires Caltrans to provide specified property documents on request and sets the adjusted purchase price as the basis for property tax assessment.

Key takeaways

• Current and former tenants with priority to buy eligible surplus residential property would pay condition-adjusted fair market value instead of standard fair market value.
• This change applies when the property has not been sold under earlier required sale priorities and is offered to eligible current or former tenants.
• Upon request, the Department of Transportation must provide specified documents about the surplus residential property to people or entities offered or purchasing the property.
• Property bought at the condition-adjusted fair market value under this bill must be assessed for property tax purposes at that condition-adjusted price.

Pasadena Surplus Home Sales ​

The bill changes the price offered to eligible current tenants when Pasadena sells surplus residential property. Instead of fair market value, those tenants must be offered the property at a condition-adjusted fair market price. It also changes the deadline for Pasadena to start building or acquire replacement affordable homes after it sells unoccupied homes.

Key takeaways

• Eligible current tenants in good standing must be offered surplus residential property at a condition-adjusted fair market price instead of the full fair market value.
• The bill retains the priority for specified current tenants to receive these purchase offers.
• Pasadena must start construction or complete acquisition of affordable homes equal to at least three times the number of unoccupied homes it acquired.
• The city now has two years after receiving proceeds from the later sale of the unoccupied homes to meet that affordable-housing requirement.
• The bill makes related changes to implement the revised pricing and timing rules.

South Pasadena Surplus Home Sales ​

The bill changes how South Pasadena sells surplus residential property to eligible current tenants by using a condition-adjusted fair market price rather than the regular fair market value. It also changes the deadline for replacing certain vacant homes with affordable units and requires proceeds from later sales to be deposited into a continuously funded account.

Key takeaways

• Eligible current tenants in good standing must be offered surplus residential property at a price adjusted for the property’s condition rather than at unadjusted fair market value.
• For vacant homes acquired by South Pasadena after July 1, 2026, the city must begin construction or complete acquisition of replacement affordable units within two years after receiving proceeds from the homes’ later sale.
• The affordable-unit requirement remains tied to providing at least three affordable units for each vacant home covered by the law.
• The bill makes related changes to the South Pasadena surplus-property rules.
• Required new deposits into a continuously appropriated account make the bill an appropriation.

Special Rules for Pasadena Cities ​

This part of the bill declares that a special law is necessary for the Cities of South Pasadena and Pasadena. The declaration supports applying the bill’s provisions specifically to those two cities rather than statewide.

Key takeaways

• The bill makes legislative findings that a special statute is necessary for South Pasadena and Pasadena.
• The bill’s special treatment is limited to the Cities of South Pasadena and Pasadena.
• This declaration provides the stated basis for using city-specific rules instead of a general statewide law.

Local Costs and Immediate Effect ​

The bill places new duties on the Cities of Pasadena and South Pasadena, creating a state-required local program. If the Commission on State Mandates finds that these duties create reimbursable state-mandated costs, the state must reimburse them under existing procedures. The bill takes effect immediately as an urgency statute.

Key takeaways

• The bill imposes new requirements on the Cities of Pasadena and South Pasadena.
• The new requirements are treated as a state-mandated local program.
• If the Commission on State Mandates finds reimbursable state-mandated costs, reimbursement must be provided through the existing statutory process.
• The bill takes effect immediately.