AB 2329 (2025) — Surplus residential property: condition-adjusted fair market value: Cities of Pasadena and South Pasadena.

AMENDED IN SENATE AUGUST 13, 2026

AMENDED IN SENATE JULY 2, 2026

AMENDED IN SENATE JUNE 18, 2026

AMENDED IN ASSEMBLY APRIL 13, 2026

CALIFORNIA LEGISLATURE— 2025–2026 REGULAR SESSION

ASSEMBLY BILLNo. 2329

Introduced by Assembly Member Fong

February 19, 2026

An act to amend Sections 54236, 54237, 54238, 54238.8, 54239.5, and 54239.6 of, and to add ~~Sections 54238.1 and~~ Section 54238.2 to, the Government Code, relating to surplus residential property.

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

LEGISLATIVE COUNSEL’S DIGEST

(1) 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 specified surplus residential property, including that a state agency disposing of single-family surplus residential property first offer the property at the appraised fair market value to former owners and present occupants, and then offer the property at an affordable price to other present occupants who have occupied the property for a specified number of years and who meet certain income levels. Existing law sets certain parameters for the calculation of an affordable price for purposes of these provisions based on, among other things, the fair market value of the property.

This bill would, instead, require the first tier priority offer to be based on the appraised condition-adjusted fair market value and would define “condition-adjusted fair market value” to mean the fair market value of the property as of October 13, 2019, and as adjusted as to reflect the existing “as is” condition of the property and the amount needed to make certain repairs and capital improvements, as provided. The bill would revise the above-specified parameters for calculating an affordable price ~~to instead be based on the condition-adjusted fair market value.~~ so that the price would be based on the fair market value or the condition-adjusted fair market value of the property, whichever is less. The bill would establish requirements relating to the performance and cost of the inspection of the property, and define various terms for purposes of these provisions, including, among others, “guidelines.” The bill would also, for surplus residential property sold at a condition-adjusted fair market value, exempt the selling agency from providing repairs to the property, as specified.

(2) If the surplus residential property is not sold pursuant to the priorities described above, or pursuant to other specified priorities, existing law requires the property to then be sold at fair market value, with priority given first to purchasers who are present tenants in good standing, as provided, and then to former tenants who were in good standing at the time they vacated the premises, as provided.

This bill would, instead, require the property to be sold to those present or former tenants at condition-adjusted fair market value.

This bill would require any dispute between the Department of Transportation and a purchaser regarding the final sales price of surplus residential property offered at the condition-adjusted fair market value sales price to be submitted to the Office of Administrative Hearings, as provided. The bill would require the department to provide certain documents related to the surplus residential property to all persons or entities offered or purchasing surplus residential property. The bill would require any surplus residential property purchased at the condition-adjusted fair market value price pursuant to the bill to be assessed at its condition-adjusted fair market value price for property tax purposes.

(3) Existing law contains provisions that are specific to the sale of surplus residential property located in the City Pasadena. Those provisions, among other things, contain a priority requiring surplus residential property located in the city to be offered at fair market value to specified present tenants who are in good standing, as provided.

This bill would, instead, require the property to be offered to those present tenants at condition-adjusted fair market value. The bill would, for residential property sold at a condition-adjusted fair market value, exempt the City of Pasadena from providing repairs to the property, as specified. The bill would authorize the City of Pasadena, in a transaction between the city and the Department of Transportation, and without taking ownership of surplus residential property, to offer the residence to the present tenants, regardless of whether the tenant is in good standing, as specified, at the condition-adjusted fair market value price. The bill, among other things, would require the proceeds realized by the city from this type of sale to be placed into an affordable housing trust fund, as provided. The bill would make other related changes.

Existing law also requires the City of Pasadena to commence the construction, or complete acquisition, of affordable units in an amount at least equal to 3 times the number of unoccupied homes acquired by the city by December 31, 2026.

This bill would change the timing for this requirement to within 2 years from the date on which the proceeds from the subsequent sale of the unoccupied homes are received, as specified.

(4) Existing law contains provisions that are specific to the sale of surplus residential property located in the City of South Pasadena. Those provisions, among other things, contain a priority requiring surplus residential property located in the city to be offered at fair market value to specified present tenants who are in good standing, as provided.

This bill would, instead, require the property to be offered to those present tenants at condition-adjusted fair market value. The bill would, for residential property sold at a condition-adjusted fair market value, exempt the City of South Pasadena providing repairs to the property, as specified. The bill would authorize the City of South Pasadena, in a transaction between the city and the Department of Transportation, and without taking ownership of surplus residential property, to offer the residence to the present tenants, regardless of whether the tenant is in good standing, as specified, at the condition-adjusted fair market value price. The bill would require the proceeds realized by the city from this type of sale to be placed into an affordable housing trust fund, as provided. The bill would make other related changes.

Existing law also requires the City of South Pasadena to commence the construction, or complete acquisition, of affordable units in an amount at least equal to three times the number of unoccupied homes acquired by the city by July 1, 2028.

This bill would, for unoccupied homes acquired by the City of South Pasadena after July 1, 2026, change the timing for this requirement to within 2 years from the date on which the proceeds from the subsequent sale of the unoccupied homes are received, as specified.

(5) This bill would make legislative findings and declarations as to the necessity of a special statute for the Cities of South Pasadena and Pasadena.

(6) By imposing new requirements on the Cities of South Pasadena and Pasadena, this bill would impose a state-mandated local program.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that, if the Commission on State Mandates determines that the bill contains costs mandated by the state, reimbursement for those costs shall be made pursuant to the statutory provisions noted above.

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

SECTION 1.

Section 54236 of the Government Code is amended to read:

54236.

(a) As used in this article, the term “offer” means to solicit proposals prior to sale in a manner calculated to achieve a sale under the conditions specified, and to hold the offer open for a reasonable period of time, which shall be no more than one year, unless the time is extended by the selling agency at its discretion, for a period to be specified by the selling agency.

(b) As used in this article, the term “affordable price” means, in the case of a purchaser, other than a lower income household, the price for residential property for which the purchaser’s monthly payments will not exceed that portion of the purchasing household’s adjusted income as determined in accordance with the regulations of the United States Department of Housing and Urban Development, issued pursuant to Section 235 of the National Housing Act; and, in the case of a purchaser that is a lower income household, the price for residential property for which the purchaser’s monthly payments will not exceed that portion of the purchasing household’s adjusted income as determined in accordance with the regulations of the United States Department of Housing and Urban Development issued pursuant to Section 8 of the United States Housing Act of 1937.

(c) As used in this article, the term “single-family residence” means a real property improvement used, or intended to be used, as a dwelling unit for one family.

(d) (1) As used in this article, the term “surplus residential property” means land and structures owned by any agency of the state that is determined to be no longer necessary for the agency’s use, and that is developed as single-family or multifamily housing, except property being held by the agency for the purpose of exchange.

(2) Surplus residential properties shall only include land and structures that, at the time of purchase by the state, the state had intended to remove the residences thereon and to use the land for state purposes.

(e) As used in this article, the term “displacement” includes, but is not limited to, persons who will have to move from surplus residential property that they occupy when it is sold by a state agency because they are unable to afford to pay the price that the state agency is asking for the residential property.

(f) As used in this article, the term “fair market value” shall mean fair market value as of the date the offer of sale is made by the selling agency pursuant to the provisions of this article and shall reflect the existing “as is” condition of the property, taking into account any repairs required to make the property safe and habitable. This definition shall not apply to terms of sale 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.

(g) As used in this article, the term “affordable rent” means, in the case of an occupant person or family, other than a person or family of low or moderate income, rent for residential property that is not more than 25 percent of the occupant household’s gross monthly income, and in the case of an occupant person or family of low or moderate income, rent for residential property that is not more than the percentage of the adjusted income of the occupant person or family as permitted under regulations of the United States Department of Housing and Urban Development issued pursuant to Section 8 of the United States Housing Act of 1937, but not in excess of the market rental value for comparable property.

(h) As used in this article, the term “area median income” means median household income, adjusted for family size as determined in accordance with the regulations of the United States Department of Housing and Urban Development issued pursuant to Section 235 of the National Housing Act, as amended (Public Law 90-448), for the standard metropolitan statistical area (SMSA), in which surplus residential property to be disposed of pursuant to this article is located, or the county in which the property is located, if it is outside an SMSA.

(i) As used in this article, the term “persons and families of low or moderate income” means persons and families who meet both of the following conditions:

(1) Meet the definition of persons and families of low or moderate income set forth in Section 50093 of the Health and Safety Code.

(2) Have not had an ownership interest in real property in the last three years.

(j) As used in this article, the term “lower income households” means lower income households as defined in Section 50079.5 of the Health and Safety Code.

(k) (1) As used in this article, the term “condition-adjusted fair market value” means the fair market value of the property as of October 13, 2019, as determined by an independent appraiser, and as adjusted as provided in this subdivision.

(2) The appraiser shall adjust the fair market value of the property as of October 13, 2019, to reflect both of the following:

(A) The existing “as is” condition of the property.

(B) (i) The amount needed to make any repairs and capital improvements to make the property safe and habitable based on an independent inspection report.

(ii) The amount shall be calculated at the time of inspection and shall be arrived at based upon the condition of the property at the time of inspection.

(3) The inspection shall be performed by a state licensed general contractor or a certified home inspector, if the inspector is also a general contractor.

(4) The cost of the appraiser and the inspection, including the inspection report, shall be borne by the selling agency.

(5) The tenant may obtain their own appraisal and inspection at the tenant’s cost. The inspection shall be performed by a state licensed general contractor or a certified home inspector, if the inspector is also a general contractor.

(l) As used in this article, the term “capital improvements” means the installation, replacement, or substantial rehabilitation of an improvement related to the structure that has a useful life of five years or more and is permanently affixed so that if the improvement was removed, it would cause damage to the property or the improvement itself. Excluded from capital improvements, is ordinary maintenance and repair. Examples of capital improvements include replacement of the roof or replacement of building components, such as electrical or plumbing. Painting existing cabinets, repairing a broken step, or replacing a thermostat is not considered a capital improvement.

(m) As used in this article, the term “workforce housing” means housing for persons and families whose household income is between 121 percent and 180 percent of the area median income, and shall be rented or sold at the workforce housing price as further described in the guidelines. For-sale units shall have a regulatory agreement requiring a workforce housing sales price or workforce housing rent for a minimum of 55 years for rental and 45 years for owner-occupied workforce housing.

(n) As used in this article, the term “guidelines” means regulations adopted by the legislative body of the city to implement the rental or sale of workforce housing. The guidelines shall include, but not be limited to, provisions related to establishing the parameters for eligibility of persons and families to rent or purchase workforce housing, the determination of rents and sales prices, the monitoring of workforce housing, restrictions regarding the use, resale, transfers, and refinancing related to for-sale units and any other provisions to implement the workforce housing program.

SEC. 2.

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 condition-adjusted 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 ~~condition-adjusted~~ fair market value, and shall not be greater than the ~~condition-adjusted~~ fair market value. When a single-family residence is offered to present occupants at a price that is less than ~~condition-adjusted~~ 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. If the present occupants pursuant to paragraphs (2) and (3) of subdivision (a) desire to purchase the single-family residences at fair market value or are offered the single-family residences at fair market value by the agency of the state disposing of surplus residential property, the price shall not be greater than the condition-adjusted fair market value price. In that case, the selling agency shall not be required to provide repairs, including repairs required by lenders and government housing assistance programs.

(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 the ~~condition-adjusted~~ 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 condition-adjusted 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, and 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. Next priority shall be given to purchasers who will be owner-occupants, except that in such case, the surplus residential property shall be sold at fair market value. The selling agency shall not be required to provide repairs, including repairs required by lenders and government housing assistance programs, for surplus residential property sold at condition-adjusted fair market value. 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) 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.

(D) As used in this paragraph, “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. 3.

Section 54238 of the Government Code is amended to read:

54238.

In the event a purchaser of a surplus residential property purchased at an affordable price does not comply with the applicable terms, conditions, and restrictions imposed pursuant to Section 54237 of this article, to assure that the housing will remain available to persons and families of low or moderate income, the state agencies that sold the property may require that the purchasers pay the state the difference between the actual price paid by the purchaser for the property and the fair market value of the property at the time of the agency’s determination of noncompliance, plus 6 percent interest on that amount for the period of time the land has been held by the purchaser. This section does not limit the right to seek injunctive relief to enforce the provisions of this article.

SEC. 4.
Section 54238.1 is added to the Government Code, to read:
54238.1.
Any dispute between the Department of Transportation and a purchaser regarding the final sales price of surplus residential property offered at the condition-adjusted fair market value sales price shall be submitted to the Office of Administrative Hearings within 60 days of the department’s written offer to the purchaser. The Office of Administrative Hearings shall make a determination on the condition-adjusted fair market value sales price within 90 days of receiving a request for review.

~~SEC. 5.~~SEC. 4.

Section 54238.2 is added to the Government Code, to read:

54238.2.

(a) The Department of Transportation shall provide to all persons or entities offered surplus residential property and to purchasers of surplus residential property all documents related to the surplus residential property. These documents shall include, but not be limited to, valuation and appraisal materials, property condition, repair, and inspection reports, tenant leases, complete rental history, rent ledgers, including late notices, solicitations sent to prospective purchasers, title reports, and any environmental reports, including reports on lead, asbestos, or geotechnical issues. The department shall not require the execution of a nondisclosure agreement relating to these documents.

(b) The Department of Transportation shall also provide to a purchaser or potential purchaser of surplus residential property all appraisals, calculations, and documents related to the purchase price, including any adjustments or credits, purchase and sale agreement, escrow instructions, and a written explanation of how rent obligations or other balances, if owed, will be handled before the close of escrow. The department shall not require the execution of a nondisclosure agreement relating to these documents.

~~SEC. 6.~~SEC. 5.

Section 54238.8 of the Government Code is amended to read:

54238.8.

(a) Any surplus residential property purchased at an affordable price pursuant to this article shall be assessed at its affordable price for property tax purposes.

(b) Any surplus residential property purchased at a reasonable price pursuant to this article shall be assessed at its reasonable price for property tax purposes.

(c) Any surplus residential property purchased at the condition-adjusted fair market value price pursuant to this article shall be assessed at its condition-adjusted fair market value price for property tax purposes.

(d) This section shall only apply to surplus residential properties for State Route 710, in the County of Los Angeles.

~~SEC. 7.~~SEC. 6.

Section 54239.5 of the Government Code is amended to read:

54239.5.

Notwithstanding subdivision (d) of Section 54237, after a surplus residential property located within the City of Pasadena is offered for sale pursuant to subdivisions (a) to (c), inclusive, of Section 54237, the surplus residential property shall be offered for sale in accordance with all of the following priorities and procedures:

(a) After the surplus residential property is offered for sale pursuant to subdivisions (a) to (c), inclusive, of Section 54237, these properties shall then be offered at condition-adjusted fair market value to present tenants who have occupied the property for five years or more and who are in good standing with all rent obligations current and paid in full, with first right of occupancy to the present tenants.

(b) After the surplus residential property is offered for sale pursuant to subdivisions (a) to (c), inclusive, of Section 54237 and subdivision (a) of this section, and if the property is not occupied by tenants, the property shall be offered to the City of Pasadena subject to all of the following:

(1) The sales price shall be the price paid by the Department of Transportation for original acquisition. The original acquisition price shall not be adjusted for inflation.

(2) Surplus residential property sold pursuant to this subdivision shall be sold in its existing “as is” condition.

(3) Except as otherwise provided in this paragraph, the City of Pasadena shall, with the proceeds generated from the subsequent sale of unoccupied homes, finance the production or acquisition of affordable housing units. Units produced must have a regulatory agreement requiring an affordable sales price or an affordable rent, as defined in Sections 50052.5 and 50053 of the Health and Safety Code, for a minimum of 55 years for rental and 45 years for owner-occupied affordable housing. Units acquired must have a regulatory agreement requiring an affordable rent, as defined in Section 50053 of the Health and Safety Code, for a minimum of 55 years for rental. Proceeds may be used to finance either or both of the following:

(A) The production of three housing units affordable to persons and families of very low, low, and moderate income, as defined in Section 50093 of the Health and Safety Code, for every unoccupied home purchased by the City of Pasadena.

(B) The acquisition of three existing units for use as rental housing affordable to persons and families of very low, low, and moderate income, as defined in Section 50093 of the Health and Safety Code, for every unoccupied home purchased by the City of Pasadena.

(4) Prior to closing escrow on the purchase of the surplus residential property from the Department of Transportation, the City of Pasadena shall demonstrate to the Department of Housing and Community Development the zoned capacity on parcels suitable for housing development to produce at least three affordable units, as defined in paragraph (3), for each housing unit on the surplus residential property being purchased and identify and analyze potential and actual governmental constraints to the maintenance, improvement, or development of housing affordable to persons and families of low income, including housing for people with disabilities, on said parcels to the satisfaction of the Department of Housing and Community Development. The analysis must also demonstrate local efforts to remove constraints that hinder development of the parcels and evaluate their impact on the speed of delivery and depth of affordability of the necessary affordable units prescribed in paragraph (3).

(5) Units may be produced or acquired on a single site, or on multiple sites.

(6) All units acquired or produced shall be within high or highest resource census tracts within the City of Pasadena, as identified by the latest edition of the California Tax Credit Allocation Committee’s opportunity maps. To the greatest extent possible, units acquired or produced shall be in geographic proximity to the unoccupied homes that were sold by the City of Pasadena.

(7) The City of Pasadena shall commence construction or complete acquisition of all affordable units numbering at least three times the total number of unoccupied homes acquired by the city within two years from the date on which the proceeds from the subsequent sale of the unoccupied homes as described in paragraph (3) are received.

(8) Notwithstanding any other law, funds generated through the sale of unoccupied homes by the City of Pasadena shall be held by the City of Pasadena for the sole purpose of the financing of these units.

(9) The City of Pasadena shall include as an attachment to its annual report required by paragraph (2) of subdivision (a) of Section 65400 all of the following:

(A) Current ownership status of unoccupied homes in the State Route 710 corridor purchased by the City of Pasadena, and an accounting of funds spent by the city on the purchase of these homes and generated through their sale.

(B) The City of Pasadena shall provide documents to the Department of Housing and Community Development that evidence sale. These documents shall include purchase and sale agreements, escrow instructions, and final HUD-1 form closing statements.

(C) Documentation of rezoning actions taken by the City of Pasadena to ensure the continued availability of sufficient capacity for development of sufficient affordable housing to accommodate all units prescribed in paragraph (3).

(D) Documentation of other actions taken by the City of Pasadena to support its compliance with paragraph (3), including the acquisition of homes for use as affordable housing, rehabilitation of acquired homes or apartment units, or new construction of homes or apartment units for the same purpose.

(E) Other information requested by the Department of Housing and Community Development regarding the City of Pasadena’s compliance with this paragraph.

(10) At the end of the period defined in paragraph (7), the City of Pasadena shall additionally report all of the following information to the Department of Housing and Community Development:

(A) A summary of all prior reporting.

(B) Supporting documentation that evidences the acquisition or commencement of construction on a sufficient number of units of affordable housing to satisfy paragraphs (3) and (7) in a form agreeable to the Department of Housing and Community Development.

(C) An accounting of total funds spent to acquire unoccupied homes from the Department of Transportation pursuant to this paragraph.

(D) An accounting of funds generated through the sale of these homes.

(E) Aggregate data on low- and moderate-income tenants and owners residing in the newly acquired or constructed units, including, but not limited to, information relating to income eligibility, household size, and other information as required by the Department of Housing and Community Development that is not individually identifiable.

(F) Other information requested by the Department of Housing and Community Development regarding the City of Pasadena’s compliance with this paragraph.

(11) Failure to comply with any of paragraphs (1) to (10), inclusive, shall require the City of Pasadena to pay a fine of an amount equal to the funds generated through the sale of unoccupied homes pursuant to this paragraph less the city’s acquisition cost. Fines shall be deposited into an account held by the Department of Housing and Community Development under the stipulations of Section 50470 within 30 calendar days of notification of failure to comply, and made accessible for the development of housing for persons and families of low and moderate income residing exclusively in the City of Pasadena.

(12) Terms of paragraph (11) may be subject to up to two two-year extensions from the deadline specified in paragraph (7), provided the City of Pasadena is able to demonstrate sufficient progress on the development or acquisition of all required affordable units. Sufficient progress may include, but is not limited to, an executed option agreement or exclusive negotiation agreement for purchase of property intended for conversion to affordable units, completed project entitlements or building permits, executed purchase agreements and draft covenants for the acquisition or rehabilitation of market rate units for the purpose of conversion to affordable units, a combination thereof, or other proof of progress at the discretion of the Director of the Department of Housing and Community Development.

(13) Any surplus funds remaining after the completion of the construction of the required affordable units shall be placed into an affordable housing fund and used at the discretion of the City of Pasadena to increase, preserve, and improve the supply of affordable housing in the City of Pasadena. Uses of the fund may include, but are not limited to, the construction, production, or acquisition of rental or for-sale housing affordable to persons and families of very low, low, or moderate income, as defined in Section 50093 of the Health and Safety Code, rehabilitation or preservation of affordable housing units, assistance to first-time homebuyers, gap financing, or other financial assistance to third parties for the development of affordable housing. Funds may be used for the benefit of both rental and owner-occupied affordable housing.

(14) Compliance with any clause in paragraphs (3) to (13), inclusive, shall be determined by the Department of Housing and Community Development and is not subject to appeal.

(15) The Department of Housing and Community Development may review, adopt, amend, and repeal the standards, forms, or definitions to implement paragraph (3) to (14), inclusive. Any standards, forms, or definitions adopted to implement this article shall not be subject to Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2.

(16) The surplus residential property subject to this subdivision shall be subject to a covenant recorded against the property to ensure the property’s use as pursuant to this subdivision.

(17) Notwithstanding paragraphs (3) to (15), inclusive, if the City of Pasadena does not resell a surplus residential property sold to it by the Department of Transportation within two years of closure of the sale, the property shall be used as affordable housing pursuant to subdivision (a) of Section 54239.4 or for workforce housing, at the discretion of the City of Pasadena.

(18) Terms of paragraph (17) may be subject to up to one two-year extension provided the City of Pasadena is able to demonstrate sufficient progress on the sale of the surplus residential properties. Sufficient progress may include proof that the property has been listed for 180 days at a price that does not exceed fair market value based on comparable sales in the City of Pasadena with no offers, unexpected structural damage due to a natural disaster or similar occurrence, or other proof of progress at the discretion of the Director of the Department of Housing and Community Development.

(19) The City of Pasadena shall monitor compliance with the covenant required by paragraph (16). The City of Pasadena may charge the property owner a fee to recover the cost of this monitoring.

(c) After the surplus residential property is offered for sale pursuant to subdivisions (a) to (c), inclusive, of Section 54237 and subdivisions (a) and (b) of this section, the property shall be offered in accordance with the priorities and procedures specified in subdivision (d) of Section 54237. When the surplus residential property is offered to the City of Pasadena pursuant to subdivision (d) of Section 54237, the City of Pasadena may elect to purchase the surplus residential property in accordance with and for the purposes set forth in subdivision (d) of Section 54237, or the City of Pasadena may elect to proceed with the procedures set forth in subdivision (h).

(d) After the surplus residential property is offered for sale pursuant to subdivision (c), the property shall be offered in accordance with the priorities and procedures specified in subdivision (e) of Section 54237.

(e) The Department of Transportation may designate in regulations to, or delegate by agreement to, a public agency to monitor the purchasers’ compliance with the terms, conditions, and restrictions required by subdivisions (c) and (d) and subdivision (d) of Section 54237.

(1) If the monitoring is not performed by a state agency, the monitoring entity shall prepare and submit to the Legislature reports that describe how the purchasers complied with this subdivision and how they were monitored for compliance. The first report shall be submitted five years after the first property is sold pursuant to this subdivision, and subsequent reports shall be submitted every five years thereafter until the last covenant expires. A report to be submitted pursuant to this subparagraph shall be submitted in compliance with Section 9795.

(2) The monitoring entity may charge the property owner a fee to recover the cost of this monitoring and reporting.

(f) Before selling unimproved property within the State Route 710 corridor in the City of Pasadena pursuant to Section 118 of the Streets and Highways Code, the Department of Transportation shall offer to sell the property to the City of Pasadena, as a housing-related entity for affordable housing purposes or for workforce housing, at the discretion of the City of Pasadena, and then to another housing-related entity, pursuant to the terms and conditions provided in subdivision (d) of Section 54237, but at the price paid by the Department of Transportation for original acquisition.

(g) (1) (A) As a condition of the sale of property to a housing-related entity pursuant to subdivision (c) or (d), the housing-related entity shall provide an enforceable commitment to the selling agency that, if a construction project is undertaken on the property, and the entirety of the project is not a public work for which prevailing wages must be paid for purposes of Chapter 1 (commencing with Section 1720) of Part 7 of Division 2 of the Labor Code, all construction workers employed on the project will be paid at least the general prevailing rate of per diem wages for the type of work and geographic area, as determined by the Director of Industrial Relations pursuant to Sections 1773 and 1773.9 of the Labor Code, except that apprentices registered in programs approved by the Chief of the Division of Apprenticeship Standards may be paid at least the applicable apprentice prevailing rate.

(B) As a condition of the sale of property to the city pursuant to subdivision (b), the city shall provide an enforceable commitment to the selling agency that all construction workers employed on the following projects will be paid at least the general prevailing rate of per diem wages for the type of work and geographic area, as determined by the Director of Industrial Relations pursuant to Sections 1773 and 1773.9 of the Labor Code, except that apprentices registered in programs approved by the Chief of the Division of Apprenticeship Standards may be paid at least the applicable apprentice prevailing rate:

(i) Any project involving construction of units pursuant to paragraph (3) of subdivision (b), if the entirety of the project is not a public work for which prevailing wages must be paid for purposes of Chapter 1 (commencing with Section 1720) of Part 7 of Division 2 of the Labor Code.

(ii) Any project involving construction on properties subsequently sold to a housing-related entity by the city pursuant to subdivision (b), if the entirety of the project is not a public work for which prevailing wages must be paid for purposes of Chapter 1 (commencing with Section 1720) of Part 7 of Division 2 of the Labor Code.

(2) If the project is subject to paragraph (1), then for those portions of the project that are not a public work all of the following shall apply:

(A) The housing-related entity or city shall ensure that the prevailing wage requirement is included in all contracts for the performance of all construction work.

(B) All contractors and subcontractors shall pay to all construction workers employed in the execution of the work at least the general prevailing rate of per diem wages, except that apprentices registered in programs approved by the Chief of the Division of Apprenticeship Standards may be paid at least the applicable apprentice prevailing rate.

(C) Except as provided in subparagraph (E), all contractors and subcontractors shall maintain and verify payroll records pursuant to Section 1776 of the Labor Code and make those records available for inspection and copying as provided therein.

(D) Except as provided in subparagraph (E), the obligation of the contractors and subcontractors to pay prevailing wages may be enforced by the Labor Commissioner through the issuance of a civil wage and penalty assessment pursuant to Section 1741 of the Labor Code, which may be reviewed pursuant to Section 1742 of the Labor Code, within 18 months after the completion of the project, or by an underpaid worker through an administrative complaint or civil action, or by a joint labor-management committee though a civil action under Section 1771.2 of the Labor Code. If a civil wage and penalty assessment is issued, the contractor, subcontractor, and surety on a bond or bonds issued to secure the payment of wages covered by the assessment shall be liable for liquidated damages pursuant to Section 1742.1 of the Labor Code.

(E) Subparagraphs (C) and (D) shall not apply if all contractors and subcontractors performing work on the project are subject to a project labor agreement that requires the payment of prevailing wages to all construction workers employed in the execution of the project and provides for enforcement of that obligation through an arbitration procedure. For purposes of this paragraph, “project labor agreement” has the same meaning as set forth in paragraph (1) of subdivision (b) of Section 2500 of the Public Contract Code.

(F) Notwithstanding subdivision (c) of Section 1773.1 of the Labor Code, the requirement that employer payments not reduce the obligation to pay the hourly straight time or overtime wages found to be prevailing shall not apply if otherwise provided in a bona fide collective bargaining agreement covering the worker. The requirement to pay at least the general prevailing rate of per diem wages does not preclude use of an alternative workweek schedule adopted pursuant to Section 511 or 514 of the Labor Code.

(h) (1) Without taking ownership of the surplus residential property, the City of Pasadena, in its discretion and without obligation to do so, may offer the residence to the present tenants, regardless of whether the tenant is in good standing with all rent obligations with the Department of Transportation, at the condition-adjusted fair market value price as determined by the City of Pasadena in accordance with subdivision (k) of Section 54236. If the tenant executes a purchase and sale agreement with the City of Pasadena and has secured financing approved by the City of Pasadena within the timeframes contained within the purchase and sale agreement, the parties shall proceed with a side-by-side escrow. The City of Pasadena shall not be required to provide repairs, including repairs required by lenders and government housing assistance programs, for residential property sold at condition-adjusted fair market value.

(A) The transaction between the City of Pasadena and the Department of Transportation under this subdivision shall be expressly contingent upon the closing of the escrow between the City of Pasadena and the purchaser of the surplus residential property.

(B) Except as otherwise provided in this paragraph, any proceeds realized by the City of Pasadena from the sale shall be placed into an affordable housing trust fund and shall be used at the discretion of the City of Pasadena to increase, preserve, and improve the supply of affordable housing in the City of Pasadena. Uses of the funds may include, but are not limited to, construction of new housing units, rehabilitation or preservation of affordable housing units, assistance to first-time homebuyers, gap financing, or other financial assistance to third parties for the development of affordable housing. Funds may be used for the benefit of both rental and owner-occupied affordable housing.

(2) Each purchase and sale agreement entered into by the City of Pasadena with a homebuyer under this subdivision shall require the purchasing tenant or tenants to complete an in-person homebuyer education course approved by the United States Department of Housing and Urban Development prior to the close of escrow.

(3) For purposes of this subdivision, “side-by-side escrow” means two escrow transactions, one of which is the escrow between the City of Pasadena and the Department of Transportation, and the other is the escrow between the City of Pasadena and a purchaser of the surplus residential property, as described in paragraph (1), that are opened concurrently and are contractually interdependent, such that closing of the escrow between the City of Pasadena and the Department of Transportation is contingent upon, and is intended to occur contemporaneously with, the closing of the escrow between the City of Pasadena and the purchaser of the surplus residential property.

~~SEC. 8.~~SEC. 7.

Section 54239.6 of the Government Code is amended to read:

54239.6.

Notwithstanding subdivision (d) of Section 54237, after a surplus residential property located within the City of South Pasadena is offered for sale pursuant to subdivisions (a) to (c), inclusive, of Section 54237, the surplus residential property shall be offered for sale in accordance with all of the following priorities and procedures:

(1) The sales price shall be the price paid by the Department of Transportation for original acquisition. The original acquisition price shall not be adjusted for inflation.

(2) Surplus residential property sold pursuant to this subdivision shall be sold in its existing “as is” condition.

(3) Except as otherwise provided in this paragraph, the City of South Pasadena shall, with the proceeds generated from the subsequent sale of unoccupied homes, finance the production or acquisition of affordable housing units. Units produced must have a regulatory agreement requiring an affordable sales price or an affordable rent, as defined in Sections 50052.5 and 50053 of the Health and Safety Code, for a minimum of 55 years for rental and 45 years for owner-occupied affordable housing. Units acquired must have a regulatory agreement requiring an affordable rent, as defined in Section 50053 of the Health and Safety Code, for a minimum of 55 years for rental. Proceeds may be used to finance either or both of the following:

(4) (A) Prior to closing escrow on the purchase of the surplus residential property from the Department of Transportation, the City of South Pasadena shall demonstrate to the Department of Housing and Community Development the zoned capacity on parcels suitable for housing development to produce at least three affordable units, as defined in paragraph (3), for each housing unit of the surplus residential property being purchased and identify and analyze potential and actual governmental constraints to the maintenance, improvement, or development of housing affordable to persons and families of low income, including housing for people with disabilities, on the parcels to the satisfaction of the Department of Housing and Community Development. The analysis shall also demonstrate local efforts to remove constraints that hinder development of the parcels and evaluate their impact on the speed of delivery and depth of affordability of the necessary affordable units prescribed in paragraph (3).

(B) Any parcel used for the development of these units shall be granted streamlined, ministerial approval and not be subject to a conditional use permit or other nonlegislative discretionary approval, and shall be exempt from any initiative or other measure that may preclude achieving maximum densities, including, but not limited to, any height restriction requirement. The Legislature finds and declares that, in light of the shortage of affordable housing in the state, facilitating the development of affordable housing as provided in this subparagraph is necessary to support the development and speed of delivery and the depth of affordability of the necessary affordable units prescribed in paragraph (3), as well as the sale of surplus residential properties to the City of South Pasadena by the Department of Transportation.

(5) Units may be produced or acquired on a single site, or on multiple sites.

(6) All units acquired or produced shall be within high or highest resource census tracts within the City of South Pasadena, as identified by the latest edition of the California Tax Credit Allocation Committee’s opportunity maps. To the greatest extent possible, units acquired or produced shall be in geographic proximity to the unoccupied homes that were sold by the City of South Pasadena.

(7) The City of South Pasadena shall commence construction or complete acquisition of all affordable units numbering at least three times the total number of unoccupied homes acquired by the city by July 1, 2028. For unoccupied homes acquired by the City of South Pasadena after July 1, 2026, the City of South Pasadena shall commence construction or complete acquisition of all affordable units numbering at least three times the total number of unoccupied homes acquired, within two years from the date on which the proceeds from the subsequent sale of the unoccupied homes as described in paragraph (3) are received.

(8) Notwithstanding any other law, funds generated through the sale of unoccupied homes by the City of South Pasadena shall be held by the City of South Pasadena for the sole purpose of the financing of these units.

(9) The City of South Pasadena shall include as an attachment to its annual report required by paragraph (2) of subdivision (a) of Section 65400 all of the following:

(A) Current ownership status of unoccupied homes in the State Route 710 corridor purchased by the City of South Pasadena, and an accounting of funds spent by the city on the purchase of these homes and generated through their sale.

(B) The City of South Pasadena shall provide documents to the Department of Housing and Community Development that evidence sale. These documents shall include purchase and sale agreements, escrow instructions, and final HUD-1 form closing statements.

(C) Documentation of rezoning actions taken by the City of South Pasadena to ensure the continued availability of sufficient capacity for development of sufficient affordable housing to accommodate all units prescribed in paragraph (3).

(D) Documentation of other actions taken by the City of South Pasadena to support its compliance with paragraph (3), including the acquisition of homes for use as affordable housing, rehabilitation of acquired homes or apartment units, or new construction of homes or apartment units for the same purpose.

(E) Other information requested by the Department of Housing and Community Development regarding the City of South Pasadena’s compliance with this paragraph.

(10) At the end of the period defined in paragraph (7), the City of South Pasadena shall additionally report all of the following information to the Department of Housing and Community Development:

(A) A summary of all prior reporting.

(C) An accounting of total funds spent to acquire unoccupied homes from the Department of Transportation pursuant to this paragraph.

(D) An accounting of funds generated through the sale of these homes.

(F) Other information requested by the Department of Housing and Community Development regarding the City of South Pasadena’s compliance with this paragraph.

(11) Failure to comply with any of paragraphs (1) to (10), inclusive, shall require the City of South Pasadena to pay a fine of an amount equal to the funds generated through the sale of unoccupied homes pursuant to this paragraph less the city’s acquisition cost. Fines shall be deposited into an account held by the Department of Housing and Community Development under the stipulations of Section 50470 of the Health and Safety Code within 30 calendar days of notification of failure to comply, and made accessible for the development of housing for persons and families of low and moderate income residing exclusively in the City of South Pasadena.

(12) Terms of paragraph (11) may be subject to up to two two-year extensions from the deadline specified in paragraph (7), provided the City of South Pasadena is able to demonstrate sufficient progress on the development or acquisition of all required affordable units. Sufficient progress may include, but is not limited to, an executed option agreement or exclusive negotiation agreement for purchase of property intended for conversion to affordable units, completed project entitlements or building permits, executed purchase agreements and draft covenants for the acquisition or rehabilitation of market rate units for the purpose of conversion to affordable units, a combination thereof, or other proof of progress at the discretion of the Director of the Department of Housing and Community Development.

(13) Any surplus funds remaining after the completion of the construction of the required affordable units shall be placed into an affordable housing fund and used at the discretion of the City of South Pasadena to increase, preserve, and improve the supply of affordable housing in the City of South Pasadena. Uses of the fund may include, but are not limited to, the construction, production, or acquisition of rental or for-sale housing affordable to persons and families of very low, low, or moderate income, as defined in Section 50093 of the Health and Safety Code, rehabilitation or preservation of affordable housing units, assistance to first-time homebuyers, gap financing, or other financial assistance to third parties for the development of affordable housing. Funds may be used for the benefit of both rental and owner-occupied affordable housing.

(14) Compliance with any clause in paragraphs (3) to (13), inclusive, shall be determined by the Department of Housing and Community Development and is not subject to appeal.

(16) The surplus residential property subject to this subdivision shall be subject to a covenant recorded against the property to ensure the property’s use pursuant to this subdivision.

(17) Notwithstanding paragraphs (3) to (15), inclusive, if the City of South Pasadena does not resell a surplus residential property sold to it by the Department of Transportation within two years of closure of the sale, the property shall be used as affordable housing pursuant to subdivision (a) of Section 54239.4 or for workforce housing, at the discretion of the City of South Pasadena.

(18) Terms of paragraph (17) may be subject to up to one two-year extension provided the City of South Pasadena is able to demonstrate sufficient progress on the sale of the surplus residential properties. Sufficient progress may include proof that the property has been listed for 180 days at a price that does not exceed fair market value based on comparable sales in the City of South Pasadena with no offers, unexpected structural damage due to a natural disaster or similar occurrence, or other proof of progress at the discretion of the Director of the Department of Housing and Community Development.

(19) The City of South Pasadena shall monitor compliance with the covenant required by paragraph (16). The City of South Pasadena may charge the property owner a fee to recover the cost of this monitoring.

(c) After the surplus residential property is offered for sale pursuant to subdivisions (a) to (c), inclusive, of Section 54237 and subdivisions (a) and (b) of this section, the property shall be offered in accordance with the priorities and procedures specified in subdivision (d) of Section 54237. When the surplus residential property is offered to the city pursuant to subdivision (d) of Section 54237, the City of South Pasadena may elect to purchase the surplus residential property in accordance with and for the purposes set forth in subdivision (d) of Section 54237, or the City of South Pasadena may elect to proceed with the procedures set forth in subdivision (h).

(2) The monitoring entity may charge the property owner a fee to recover the cost of this monitoring and reporting.

(f) Before selling unimproved property within the State Route 710 corridor in the City of South Pasadena pursuant to Section 118 of the Streets and Highways Code, the Department of Transportation shall offer to sell the property to the City of South Pasadena, as a housing-related entity for affordable housing purposes or for workforce housing, at the discretion of the City of South Pasadena, and then to another housing-related entity, pursuant to the terms and conditions provided in subdivision (a) of Section 54239.4, but at the price paid by the Department of Transportation for original acquisition.

(g) (1) (A) As a condition of the sale of property to a housing-related entity pursuant to subdivision (c), (d), or (f), the housing-related entity shall provide an enforceable commitment to the selling agency that, if a construction project is undertaken on the property, and the entirety of the project is not a public work for which prevailing wages must be paid for purposes of Chapter 1 (commencing with Section 1720) of Part 7 of Division 2 of the Labor Code, all construction workers employed on the project will be paid at least the general prevailing rate of per diem wages for the type of work and geographic area, as determined by the Director of Industrial Relations pursuant to Sections 1773 and 1773.9 of the Labor Code, except that apprentices registered in programs approved by the Chief of the Division of Apprenticeship Standards may be paid at least the applicable apprentice prevailing rate.

(2) If the project is subject to paragraph (1), then for those portions of the project that are not a public work all of the following shall apply:

(A) The housing-related entity or city shall ensure that the prevailing wage requirement is included in all contracts for the performance of all construction work.

(h) (1) Without taking ownership of the surplus residential property, the City of South Pasadena, in its discretion and without obligation to do so, may offer the residence to the present tenants, regardless of whether the tenant is in good standing with all rent obligations with the Department of Transportation, at the condition-adjusted fair market value price as determined by the City of South Pasadena in accordance with subdivision (k) of Section 54236. If the tenant executes a purchase and sale agreement with the City of South Pasadena and has secured financing approved by the City of South Pasadena and within the timeframes contained within the purchase and sale agreement, the parties shall proceed with a side-by-side escrow. The City of South Pasadena shall not be required to provide repairs, including repairs required by lenders and government housing assistance programs, for residential property sold at condition-adjusted fair market value.

(A) The transaction between the City of South Pasadena and the Department of Transportation under this subdivision shall be expressly contingent upon the closing of the escrow between the City of South Pasadena and the purchaser of the surplus residential property.

(B) Except as otherwise provided in this paragraph, any proceeds realized by the city from the sale shall be placed into an affordable housing trust fund and shall be used at the discretion of the city to increase, preserve, and improve the supply of affordable housing in the city. Uses of the funds may include, but are not limited to, construction of new housing units, rehabilitation or preservation of affordable housing units, assistance to first-time homebuyers, gap financing, or other financial assistance to third parties for the development of affordable housing. Funds may be used for the benefit of both rental and owner-occupied affordable housing.

(2) For purposes of this subdivision, “side-by-side escrow” means two escrow transactions, one of which is the escrow between the City of South Pasadena and the Department of Transportation, and the other is the escrow between the City of South Pasadena and a purchaser of the surplus residential property, as described in paragraph (1), that are opened concurrently and are contractually interdependent, such that closing of the escrow between the City of South Pasadena and the Department of Transportation is contingent upon, and is intended to occur contemporaneously with, the closing of the escrow between the City of South Pasadena and the purchaser of the surplus residential property.

(3) Each purchase and sale agreement entered into by the City of South Pasadena with a homebuyer under this subdivision shall require the purchasing tenant or tenants to complete an in-person homebuyer education course approved by the United States Department of Housing and Urban Development prior to the close of escrow.

~~SEC. 9.~~SEC. 8.

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 because of the unique circumstances in the Cities of South Pasadena and Pasadena.

~~SEC. 10.~~SEC. 9.

If the Commission on State Mandates determines that this act contains costs mandated by the state, reimbursement to local agencies and school districts for those costs shall be made pursuant to Part 7 (commencing with Section 17500) of Division 4 of Title 2 of the Government Code.