Gov. Newsom Cuts State Housing, Homeless Funds to Norwalk

Governor Gavin Newsom announced on Thursday that the California Department of Housing and Community Developmen has revoked Norwalk’s compliance with housing element law, making them ineligible to receive state housing and homelessness funds.

The issue dates back to early August. Norwalk was in the midst of updating the city zoning code, as well as performance and development standards. Needing time, the Norwalk City Council approved an urgency ordinance on August 6th, instituting a 45-day moratorium on a citywide moratorium establishing, implementing, or operating new “convenience stores (liquor stores), discount stores, laundromats, carwashes, payday loan establishments, emergency shelters, single-room occupancy (SRO) housing, supportive housing, and transitional housing.”

Norwalk specifically invoked the Housing Crisis Act, a 2019 law that allows for such a ban if there is a threat to public safety and health. While initially only a 45 day ordinance, the Norwalk City Council now hoped to extend it to August of 2025. City officials pushed for the Council to approve the extension as the ordinance is desperately needed.

“And now staff believes this is a very powerful tool to allow us to better assess and develop potential performance standards, development standards, and the zoning code,” explained Norwalk Interim Community Development Director Alexander Hamilton last month. “Our zoning code as all of you are aware, is pretty old – it’s from the 90s. There have been some updates, but nothing substantively on a comprehensive basis. So this will allow us to look at those uses and come back to you.”

However, the state struck back this week before the vote. While a 45 day moratorium was acceptable, an almost year long extension was deemed unacceptable by Newsom officials, both due to Norwalk being far behind state housing goals, as well as the city violating multiple state housing laws. In a letter to Mayor Margarita Rios the Norwalk City Council last month, the HCD specifically pointed to the city violating the Housing Crisis Act (HCA), the Anti-Discrimination in Land Use Law, the Affirmatively Furthering Fair Housing (AFFH), and the Housing Element Law.

Further, the HCD told Norwalk in the letter that the city has only issued permits for 175 units of the needed 5,034 Regional Housing Needs Allocation (RHNA) slots, going against state allocation needs. HCD Director Gustavo Velasquez said, ” The City of Norwalk’s disingenuous moratorium equates badly needed homes for people struggling the most with liquor stores and payday loans. In doing so, they are harming their own community and blatantly violating a myriad of state housing laws. The only option is to repeal the moratorium and move past this regrettable episode.”

State funding

With a lawsuit threatened, the response date of September 23rd came and went without any action, although Norwalk officials knew that a state ruling could come at any point afterwards. Newsom finally responded on Thursday, revoking the city’s compliance with housing element law because of their ban on homeless shelters and other housing. In addition to funding now being revoked, Newsom also said that the state may also sue the city soon if they don’t reverse course.

“After the state has provided cities and counties with unprecedented funding to address the homelessness crisis, it’s beyond cruel that Norwalk would ban the building of shelters while people are living on the city’s streets,” explained the Governor. “This crisis is urgent, and we can’t afford to stand by as communities turn their backs on those in need. No more excuses—every city, including Norwalk, must do its part and follow state housing laws.”

HCD Director Velasquez added that “The City of Norwalk’s actions have placed them in violation of state housing law, and therefore their housing element is no longer in compliance. Our Housing Accountability Unit provided the city clear guidance—with full transparency on what our next steps would be if they did not repeal this egregious ordinance. Instead of working to correct their missteps, they dug in their heels and are now ineligible for key funding and subject to the builder’s remedy.”

The state’s threat to sue is far from empty. In recent years, the Newsom Administration has successfully sued both Anaheim and Huntington Beach over similar housing law violations, with other Los Angeles County cities besides Norwalk also being looked at for violations. But Norwalk remained defiant this week amidst the HCD actions. And many commentators said that other cities may follow Norwalk, rather than seeing the state try and make an example out of them.

“Norwalk did what it had to do for the city,” said real estate attorney Bryan Sawyer to the Globe on Thursday. “It was public safety and health against state funds. Norwalk is choosing the people over money. It’s a hard call, as the homeless problem is bad everywhere. But the state is forcing them to go against what is best for the city, and the state keeps adding things on. If Norwalk doesn’t fold, expect that lawsuit.”

AG Rob Bonta is expected to announce a lawsuit later this month if Norwalk doesn’t revert.