Cap-and-Trade is a program developed by the California Air Resources Board (ARB) to reduce greenhouse gas emissions, as required by the Global Warming Solutions Act of 2006 (AB 32). Large companies that emit a certain amount of greenhouse gas (GHG) emissions are assigned a “cap” on their emissions. Those that exceed their cap must either ratchet down those emissions over time (through improvements to their facilities) OR buy “allowances to pollute” through a quarterly state auction. Learn more on our Cap-and-Trade 101 page.

In June 2014, the Legislature and Governor approved a state budget that included $130 million in 2014-2015 and at least 10% of ongoing revenue from the Greenhouse Gas Reduction Fund (estimated at $200-$300 million per year starting in 2015) for a newly-created Affordable Housing and Sustainable Communities (AHSC) Program, developed and administered by the Strategic Growth Council.

The AHSC Program contains a variety of land use and transit-oriented strategies to reduce GHG emissions. Among other things, the program will provide grants and affordable housing loans for infill and transit-oriented development and infrastructure. Projects funded by the AHSC Program will demonstrate how they support reduction of GHGs by increasing accessibility of housing, employment centers, and key destinations via low-carbon transportation options (walking, biking, and transit), resulting in fewer vehicle miles traveled. A minimum of 50% of program funds will be invested in projects benefiting disadvantaged communities and a minimum of 50% of program funds will be utilized to provide housing opportunities for lower income households.

CHC submitted comments to SGC on their draft guidelines in November.

AHSC Final guidelines were adopted on January 20. Invitations for selected concept proposal applicants to submit full applications are expected to go out on March 11, with full applications due on April 15.

What are Disadvantaged Communities?

In 2012, the Legislature passed SB 535 and directed that, in addition to reducing GHG emissions, 25% of the moneys allocated from the Greenhouse Gas Reduction Fund also must go to projects that provide a benefit to disadvantaged communities (DACs). The California Environmental Protection Agency (CalEPA) was given the responsibility for identifying DACs for purposes of this legislation based on geographic, socioeconomic, public health and environmental hazard criteria. In August 2014, the CalEPA released “Approaches to Identifying Disadvantaged Communities” and will finalize its definition of disadvantaged communities for purposes of implementing SB 535 by the end of September 2014.

In the  meantime, the ARB released their “Interim Guidance on Investments to Benefit Disadvantaged Communities.” This document sets forth draft Interim Guidance for the state and local agencies charged with the expenditure of the auction proceeds and proposes three ways for an AHSC-funded project to demonstrate that it benefits a DAC:

  1. The project is located within 1/2 mile of a DAC and reduces vehicle miles traveled and is designed to avoid displacement of DAC residents and businesses
  2. The project includes recruitment, agreements, policies or other approaches that result in at least 25% of project work hours performed by residents of a DAC
  3. The project includes recruitment, agreements, policies or other approaches that result in at least 10% of project work hours performed by residents of a DAC participating in job training programs which lead to industry-recognized credentials or certifications

CHC submitted comments to ARB on their interim guidance in September.

What is the Scientific Link Between Housing and GHG Reductions?

The California Air Resources Board, California Air Pollution Control Officers Association, Center for Neighborhood Technology, and other reputable organizations have compiled substantial evidence (see Research, below) that transit-oriented development affordable to lower-income households is an effective GHG-reduction strategy.

Basic story the research tells:

  • A large majority of households on modest budgets own a car, usually an older, higher-polluting one. Presented with the opportunity to move close to high-quality transit, sell their car, and ride a bus or light rail, people with lower incomes are likely to jump at the chance, because a car represents a significant financial burden to them. (By contrast, higher-income households may use transit to get to work, but are much more likely to retain their car and use it for most other journeys.)
  • Additionally, TOD affordable to people on modest budgets can help prevent the displacement that occurs when transit — a desirable amenity — causes rents and property values to increase in the surrounding area. Research has shown that displacement of low-income residents robs transit systems of core riders and results in fewer GHG reductions from transit investments. Moreover, displaced residents often relocate to areas with cheaper housing at the outskirts of metropolitan areas, forcing them to rely on older, high-polluting cars to access jobs and services.
  • This means investments in TOD affordable to lower-income households will give the state the biggest GHG benefit. It will also make the most of the state’s transit investments, ensuring ridership for decades to come (because the developments must remain affordable for at least 55 years).

Research & Resources