AMENDED IN SENATE JULY 2, 2026

AMENDED IN SENATE JUNE 9, 2026

AMENDED IN ASSEMBLY MARCH 4, 2026

CALIFORNIA LEGISLATURE— 2025–2026 REGULAR SESSION

96

Introduced by Assembly Member Harabedian

January 16, 2026

An act to amend Section 54237 of the Government Code, relating to surplus land.

Vote: majority   Appropriation: no   Fiscal committee: yes   Local program: no

LEGISLATIVE COUNSEL’S DIGEST

Existing law establishes priorities and procedures that any state agency disposing of surplus property is required to follow. Existing law sets forth an order of priority for the disposal of surplus nonresidential property. In this regard, existing law requires a tenant in good standing of a nonresidential property who is a city or a nonprofit organization to be given priority to purchase the property at the lesser of fair market value or value in use, as specified. Existing law prohibits the Department of Transportation from selling a nonresidential property to a tenant as described above at a value below the minimum sales price, as defined. Existing law requires an offer to sell surplus nonresidential property as described above at less than fair market value to be subject to appropriate terms, conditions, and restrictions, as specified.

This bill would create an exception from that prohibition for a tenant who is a nonprofit organization that operates multiple residential structures primarily for the purposes of familial habitation during medical treatment and related administrative activities. Specifically, the bill would prohibit the tenant from being required to pay to the Department of Transportation any amounts in excess of the lesser of fair market value or value in use, as specified, regardless of any contractual obligation to pay those amounts. The bill would require the tenant to be required to repay any amounts not paid pursuant to the above provision if the tenant sells the property or no longer qualifies as a nonprofit organization. The bill would require the Department of Transportation to include that requirement in the terms, conditions, and restrictions of the offer to the tenant. The bill would make its provisions retroactive and applicable to any contracts entered into between the Department of Transportation and a qualified tenant.

This bill would make legislative findings and declarations as to the necessity of a special statute for certain nonresidential tenants carrying long-term debt obligations to the Department of Transportation.

This bill would make legislative findings and declarations related to a gift of public funds.

The people of the State of California do enact as follows:

SECTION 1.

Section 54237 of the Government Code is amended to read:

54237.

(a) Notwithstanding Section 11011.1, an agency of the state disposing of surplus residential property shall do so in accordance with the following priorities and procedures:

(1) First, all single-family residences presently occupied by their former owners shall be offered to those former owners at the appraised fair market value.

(2) Second, all single-family residences shall be offered, pursuant to this article, to their present occupants who have occupied the property for two years or more and who are persons and families of low or moderate income.

(3) Third, all single-family residences shall be offered, pursuant to this article, to their present occupants who have occupied the property for five years or more and whose household income does not exceed 150 percent of the area median income.

(4) Fourth, a single-family residence shall not be offered, pursuant to this article, to present occupants who are not the former owners of the property if the present occupants have had an ownership interest in real property in the last three years.

(b) Single-family residences offered to their present occupants pursuant to paragraphs (2) and (3) of subdivision (a) shall be offered to those present occupants at an affordable price. The price shall not be less than the price paid by the agency for original acquisition, unless the acquisition price was greater than the current fair market value, and shall not be greater than fair market value. When a single-family residence is offered to present occupants at a price that is less than fair market value, the selling agency shall impose terms, conditions, and restrictions to ensure that the housing will remain available to persons and families of low or moderate income and households with incomes no greater than the incomes of the present occupants in proportion to the area median income. The Department of Housing and Community Development shall provide to the selling agency recommendations of standards and criteria for these prices, terms, conditions, and restrictions. The selling agency shall provide repairs required by lenders and government housing assistance programs, or, at the option of the agency, provide the present occupants with a replacement dwelling pursuant to Section 54237.5.

(c) If single-family residences are offered to their present occupants pursuant to paragraphs (2) and (3) of subdivision (a), the occupants shall certify their income and assets to the selling agency. When a single-family residence is offered to present occupants at a price that is less than fair market value, the selling agency may verify the certifications, in accordance with procedures used for verification of incomes of purchasers and occupants of housing financed by the California Housing Finance Agency and with regulations adopted for the verification of assets by the United States Department of Housing and Urban Development. The income and asset limitations and term of residency requirements of paragraphs (2) and (3) of subdivision (a) shall not apply to sales that are described as mitigation measures in an environmental study prepared pursuant to the Public Resources Code, if the study was initiated before this measure was enacted.

(d) (1) Except as otherwise provided in paragraph (2), all other surplus residential properties and all properties described in paragraphs (1), (2), and (3) of subdivision (a) that are not purchased by the former owners or the present occupants shall be then offered as follows:

(A) Except as required by subparagraph (B), the property shall be offered to a housing-related private or public entity at a reasonable price, which is best suited to economically feasible use of the property as decent, safe, and sanitary housing at affordable rents and affordable prices for persons and families of low or moderate income, on the condition that the purchasing entity shall cause the property to be rehabilitated and used as follows:

(i) If the housing-related entity is a public entity, the entity shall dedicate profits realized from a subsequent sale, as specified in subdivision (b) of Section 54237.7, to the construction of affordable housing within the Cities of Pasadena, South Pasadena, Alhambra, La Cañada Flintridge, and the 90032 postal ZIP Code.

(ii) If the entity is a private housing-related entity or a housing-related public entity, the entity shall cause the property to be developed as limited equity cooperative housing with first right of occupancy to present occupants, except that where the development of cooperative or cooperatives is not feasible, the purchasing entity shall cause the property to be used for low- and moderate-income rental or owner-occupied housing, with first right of occupancy to the present tenants. The price of the property in no case shall be less than the price paid by the entity for original acquisition unless the acquisition price was greater than current fair market value and shall not be greater than fair market value. Subject to the foregoing, it shall be set at the level necessary to provide housing at affordable rents and affordable prices for present tenants and persons and families of low or moderate income. When residential property is offered at a price that is less than fair market value, the selling agency shall impose terms, conditions, and restrictions that will ensure that the housing will remain available to persons and families of low or moderate income. The Department of Housing and Community Development shall provide to the selling agency recommendations of standards and criteria for prices, terms, conditions, and restrictions.

(B) (i) If the property is a historic home, the property shall be offered first to a housing-related public entity subject to clause (i) or (ii) of subparagraph (A) or to a nonprofit private entity dedicated to rehabilitating and maintaining the historic home for public and community access and use subject to clause (ii) of subparagraph (A).

(ii) For purposes of this subdivision, “historic home” means single-family surplus residential property that is listed on, or for which an application has been filed for listing on, at least one of the following by January 1, 2015:

(I) The California Register of Historical Resources, as established pursuant to Article 2 (commencing with Section 5020) of Chapter 1 of Division 5 of the Public Resources Code.

(II) The National Register of Historic Places, as established pursuant to Chapter 3021 of Title 54 of the United States Code.

(III) The National Register of Historic Places, as previously established pursuant to the federal National Historic Preservation Act (54 U.S.C. Sec. 300101 et seq.).

(2) This subdivision shall not apply to properties offered for sale pursuant to Section 54239.1, 54239.5, or 54239.6.

(e) A surplus residential property not sold pursuant to subdivisions (a) to (d), inclusive, or Section 54239.1, 54239.5, or 54239.6, as applicable, shall then be sold at fair market value, with priority given first to purchasers who are present tenants in good standing with all rent obligations current and paid in full, second to former tenants who were in good standing at the time they vacated the premises, with priority given to the most recent tenants first, and then to purchasers who will be owner occupants. The selling agency may commence the sale of property that former tenants may possess a right to purchase as provided by this subdivision 30 days after the selling agency has done both of the following:

(1) Posted information regarding the sale under this subdivision on the selling agency’s internet website.

(2) Made a good faith effort to provide written notice, by first-class mail, to the last known address of each former tenant.

(f) (1) Tenants in good standing of nonresidential properties shall be given priority to purchase, at fair market value, the property they rent, lease, or otherwise legally occupy.

(2) (A) A tenant in good standing of a nonresidential property shall be given priority to purchase, at the lesser of fair market value or value in use, if the tenant is a city or a nonprofit organization qualified as exempt under Section 501(c)(3) of the Internal Revenue Code.

(B) The Department of Transportation shall not sell a nonresidential property to a tenant described in subparagraph (A) at a value below the minimum sales price, as defined by Section 1476 of Title 21 of the California Code of Regulations as that regulation read on July 1, 2019.

(C) (i) If a nonresidential property is offered at a price that is less than fair market value, the selling agency shall impose appropriate terms, conditions, and restrictions.

(ii) Notwithstanding subparagraph (B), a qualified tenant shall not be required to pay to the Department of Transportation any owed net equity or other amounts in excess of the lesser of fair market value or value in use, regardless of any contractual obligation to pay those amounts. amounts, except as provided in clause (iii).

(iv) The changes made to this section by the act that added this clause are retroactive and apply to any contracts entered into between the Department of Transportation and a qualified tenant.

(D) For purposes of this paragraph, the following definitions apply:

(i) “Net equity” means the difference between the fair market value at time of purchase and the price paid for the surplus nonresidential property.

(ii) “Nonprofit organization” means a tax-exempt organization as defined under Section 501(c)(3) of the Internal Revenue Code.

(iii) “Qualified tenant” means a nonprofit organization that operates multiple residential structures primarily for the purposes of familial habitation during medical treatment and related administrative activities.

(iv) “Value in use” means the value of a nonresidential property assuming a specific use, that may or may not be the property’s highest and best use on the effective date of the property’s appraisal.

SEC. 2.

The Legislature finds and declares that a special statute is necessary and that a general statute cannot be made applicable within the meaning of Section 16 of Article IV of the California Constitution due to the unique circumstances facing certain nonprofit organizations that are tenants of nonresidential property which hinder their ability to raise funds for critical community services while carrying long-term debt obligations to the Department of Transportation.

SEC. 3.

The Legislature finds and declares that the amendment of Section 54237 of the Government Code by this act serves a public purpose of providing temporary housing to families with children who are receiving medical treatment in hospitals and does not constitute a gift of public funds within the meaning of Section 6 of Article XVI of the California Constitution.