California state housing officials are investigating whether the County of Orange is violating the state’s Surplus Land Act, as the county prepares to build market-rate housing on property it owns next to Santa Ana College.

It’s the same law state officials sued Anaheim for violating in that city’s sale of Angel Stadium.

At issue is whether governments should be using public land to maximize revenue from market-rate housing – and when such efforts do and don’t run afoul of state law.

The review by the California Department of Housing and Community Development – which was spurred by questions from Voice of OC – centers on county-owned land on 17th Street in Santa Ana that currently houses a public health clinic and laboratory.

County supervisors this month considered several options this month for the land, including one – ranked No. 1 by the county review panel – that called for having a private developer build hundreds of housing units on the property, none of which would be affordable.

Yet the Surplus Land Act generally requires that when local governments want to sell their land – or lease it for housing – they must first give affordable housing developers a chance to propose housing where at least 25 percent of the units are affordable.

“I think there is a direct violation there,” said Cesar Covarrubias, the executive director of the Kennedy Commission, one of OC’s most active advocacy groups for affordable housing.

“[The county is] utilizing that property to develop housing, so a large percentage of it has to be affordable,” said Covarrubias, who learned of the county proposals from Voice of OC and followed up with a warning letter to the county.

“It has to go through the Surplus Land Act to allow for a competition, so that the housing needs in Santa Ana and for those students across the street at Santa Ana College – the majority of whom will be at low and very low income [levels] – will have an opportunity to be housed in the city and in proximity to the job centers and the school center there,” he added.

County officials maintain the Surplus Land Act doesn’t apply because the county plans to use money generated from the market-rate housing to build new public health facilities.

That makes the housing development an “agency use” that’s exempt from the Surplus Land Act, says County Counsel Leon Page.

“A stated objective in the [county’s request for proposals] is to generate revenue from private uses to reduce the County’s cost to build and maintain a new [Health Care Agency] facility,” Page wrote in response to questions from Voice of OC.

“Because the property is needed for agency (i.e., Health Care Agency) uses, the property is not being disposed of for ‘the sole purpose of investment or generation of revenue,’ within the meaning of Government Code § 54221(c).”

Voice of OC started asking questions about the Surplus Land Act after reviewing records of the county’s proposal in a meeting agenda.

In response to those questions, the state’s top housing enforcement official said his staff would be probing the issue.

“We are interested in looking at this one,” said David Zisser, who leads the state’s Housing Accountability Unit, in an interview last week with Voice of OC.

That probe is ongoing as of Wednesday, said Nur Kausar, a spokeswoman for the state housing agency.​​

“We really strongly encourage local agencies to check with [the state] first before they start the disposition process to make sure we agree” about whether the Surplus Land Act applies, Zisser said, something the state does not have a record of the county doing in this case.

“The Surplus Land Act was updated and improved and strengthened in the context of a growing housing crisis in California. And so the Legislature made a decision…publicly owned land is to be prioritized for affordable housing.”

Among the needs in the area is affordable housing for Santa Ana College students, said Katrina Foley, the county supervisor who started representing Santa Ana this year as part of redistricting.

She presided over an overhaul of the plans last week, after concerns were raised by city and college officials, along with the Surplus Land Act questions from Voice of OC.

At Foley’s suggestion, last week county supervisors selected Huntington Beach-based Bridgecreek Development for the project and asked them to work with Santa Ana city and college officials to come up with a new plan with affordable housing, which is slated to return to supervisors by Oct. 18.

Foley said one of her top priorities is making sure there’s affordable housing on site.

“[Santa Ana College students] are not going to be able to pay very much because they’re in college,” Foley told Voice of OC in a phone interview Wednesday.

She also gave direction that the developer look into opportunities for people to own their homes at the property – a major focus of the City of Santa Ana that was left out of the original proposals that went to supervisors last week.

Based on county lawyers’ advice, Foley said her understanding is the project would not need to follow the Surplus Land Act process, “because we’re using the land for creating county revenue for supporting the county health care clinic and affordable housing.”

“One of the developments, the original, would probably have triggered the Surplus Land Act, where they were going to move the [health facilities] completely off site,” she added. 

The details of the next proposal – such as how many units will be affordable – are still being worked out, Foley said.

“They’ve agreed to 20 percent [affordable housing]. But we’re going to work on the puzzle,” she said.

“This is just a unique moment in time where we can do something beneficial for the City of Santa Ana, [Santa Ana College] and the county.”

Nick Gerda covers county government for Voice of OC. You can contact him at ngerda@voiceofoc.org.

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