Refreshing the Surplus Land Act

The Surplus Land Act was updated in 2023 to help public agencies meet the state’s goals for affordable housing. Some transit agencies are already in the process of taking advantage of these changes, but questions remain about implementation.

By Arianna Smith
Managing Editor
Transit California 

Changes are coming to the way that transit agencies dispose of unwanted, “surplus” land.

These changes, sparked by legislation signed into law in 2019 and 2023, are updating how all local entities, including transit agencies, must conduct the disposal of their surplus land. New proposed guidelines that are currently being drafted by the Department of Housing and Community Development (HCD) may further affect the process.

What is Surplus Land, and How Can Agencies Dispose of It?

Transit agencies often own land that they no longer need or want for their infrastructure or operations; this unwanted land is also known as “surplus” land.  While a private commercial or residential landowner in a similar situation could simply put the land up for sale, transit agencies cannot do so because they are local public agencies, and their actions are subject to the Surplus Lands Act (SLA).  

Since 1968, public agencies, including transit agencies, have been required to take steps delineated in the SLA to dispose of surplus land in a transparent, accountable manner to help ensure that public land is being sold for a fair price and will be used in a way that benefits the public. The disposing agency must declare the land “surplus” or “exempt surplus” in a public meeting, negotiate a sale in good faith or submit information to the state supporting the exemption, and submit information to the state regulatory authority for review. (There are alternative pathways to disposing of surplus land, including non-commercial agency use, and land that meets conditions for disposal to be “grandfathered” in without going through the full review process.)

To comply with the SLA, transit agencies must send notices about available surplus land to HCD, local public entities within the jurisdiction of the land’s location, and affordable housing developers.

In 2023, lawmakers introduced legislation to update the SLA to help the state address the housing crisis and meet climate goals. An author of one of the measures, Assemblymember Phil Ting of San Francisco, said of his bill before it was signed into law, “California is facing a housing crisis and unused public land has the potential to promote affordable housing development throughout the state. These properties are key to building housing that is connected to transit, schools, and jobs. In fact, most affordable housing in California is built on what used to be public land. AB 480 clarifies and strengthens provisions in the Surplus Land Act that will promote the use of public land for affordable housing."

Critically, the term “disposal” was not defined in law until the law was updated in 2023. Now, disposing of the land can mean either a sale, or a lengthy lease (more than 15 years including extension or renewal options). The updates also clearly state what “dispose” does not mean: a lease of 15 years or less, or a lease of any length of time in which development or demolition will not take place.

Additionally, 2023 amendments were intended to make it easier for agencies to dispose of certain types of “exempt surplus land.” These types of properties include land that will be sold for affordable housing or used for certain educational purposes, as well as land with physical or legal features that create extra challenges for disposal: smaller lots, former streets or rights of way, land granted by the state in trust, or airport-owned land where housing is prohibited. Whereas the declaration used to be done through the adoption of a resolution at a public meeting, it can now be done using a simple notice and publication.

The 2023 law also updated and expanded the definition of “exempt surplus land” so that agencies would have greater flexibility and more options in its disposal. Of interest, exempt surplus land property is no longer required to be disposed to a contiguous property owner, and some land that would be used for qualifying affordable housing projects may no longer have to be made available to an open competitive bid and may occur on multiple parcels. Clarifications were also made to explicitly uphold a variety of existing exemptions regarding legal restrictions that prohibit housing on surplus land due to conservation, easements, contractual obligations, certain funding source restrictions, and more.

These statutory changes provide clarifications to transit agencies, which sometimes own land that is oddly shaped or located on sites that would be difficult or impossible to develop for housing. For example, “Some of our operators own really narrow pieces of property that used to be a part of a rail line, which can’t really be used that way,” said Matt Robinson, Legislative Advocate for the Association.  

Some Association Members are Using Surplus Land to Build New Affordable Housing

Encouraging the use of surplus property as affordable housing has long been a stated goal of the SLA, but in recent years, lawmakers have updated the law to reflect housing development as a top priority. Governor Newsom’s administration built on that effort and linked housing, transit, and climate change in its 2022 State Housing Plan, A Home for Every Californian, which declared a primary objective to produce more affordable and climate-smart housing: “We aim to increase the supply of housing at all affordability levels throughout the state and target production near jobs, transit, and resources, without displacing existing residents.”

Some transit agencies are turning their surplus land into an opportunity to create lifelong, consistent transit riders while helping their local regions and the state meet important housing goals.   

In April 2023, LA Metro’s Board of Directors approved a resolution to build 10,000 housing units on current Metro-owned properties, with the goal of building much-needed housing near existing and anticipated transit — a key component of numerous state and local goals to reduce greenhouse gas emissions and slow down climate change, as well as an important part of meeting the needs of communities that lack both housing stock or access to transit.

According to an LA Metro press release, “To achieve the 10,000 goal, approximately 20 sites throughout Los Angeles County have been identified as candidates for housing development that will be near transit and provide site-specific community benefits. The identified sites are a gateway to the Metro transit system and hold unique potential to advance community development goals while attracting new riders to the Metro system.” 

LA Metro has acknowledged that many of the sites aren’t yet ready for housing, but that the transit agency can take actions that would speed up the timeline to start development. According to a 2023 LA Metro Board Report, “Many sites are encumbered by existing infrastructure, parking, environmental conditions, and/or lack basic infrastructure necessary for development. Metro can significantly accelerate the delivery of housing by conducting demolition and environmental remediation; upgrading basic site infrastructure; and constructing replacement parking without waiting for the solicitation of a developer.” The report goes on to explain why it could be worthwhile for the agency to take on this effort: “Though this requires upfront Metro investment, the expenditure would reduce development risk and increase the value of the property. The investment in site readiness will reduce developer lead times by as much as two years.”

Bay Area Rapid Transit (BART) has an established transit-oriented development program that similarly includes its surplus property to use existing agency land more efficiently, meet state housing goals, and increase ridership by locating more housing near transit: “BART’s goal is to build 20,000 homes and 4.5 million square feet of commercial space on 250 acres of BART-owned property. To help address the Bay Area’s housing crisis, 7,000 of these homes will be affordable.”

Time will tell whether the 2023 updates to the SLA will make it easier for more transit agencies to make their surplus property available for affordable housing and other publicly beneficial uses.

Next Steps for SLA Update Implementation

Association advocates played an important role in the development of the SLA’s 2023 updates to ensure that transit agencies will be able to comply with the state’s surplus property listing requirements and to dispose of their surplus property effectively and transparently, but discussions about implementation continue.

In February 2024, HCD released new draft guidelines. The Association is working with member agencies to ensure their voices are heard during the comment period and beyond while the department finalizes the guidelines.

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