Little Hope for More Housing
Now that California finally is loosening its COVID restrictions, the state is back to dealing with one of its longest-running crises: the state’s persistent housing shortages. The housing market has overheated throughout most of the country, but the median housing price has topped an astounding $758,000 in the entire state.
The reasons are easy to understand. State and local policies have restricted housing development and piled on inordinate costs on new projects. “Production averaged less than 80,000 new homes annually over the last 10 years, and ongoing production continues to fall far below the projected need of 180,000 additional homes annually,” according to California’s latest housing assessment.
The state released that report in 2018, so the problem only has worsened since then. This is largely the result of California’s growth controls, which have tried to cram more housing in the existing urban footprint while limiting construction in outlying areas. It’s yet another example of how climate-change policies are wreaking havoc on the quality of life in the state.
True to form, state officials have tried to fix the problem by imposing housing goals via edict on local governments. That policy is understandable to an extent, given that local officials — influenced by congestion-weary NIMBYs (Not In My Back Yarders) — have compounded housing shortages with their local approval process and costly regulations. People who already have their homes often oppose projects that would house newcomers.
Legislators now have come up with an interesting and useful idea that’s not the “solution” per se, but could provide additional housing units around the margins. But the bill’s struggles speak volumes about the difficulty in addressing the housing shortage problem. Senate Bill 6 would establish “a streamlined, ministerial approval process” if a housing development “satisfies specified objective planning standards.”
In providing a “by right” ability to build housing, it allows private developers to bypass many of the subjective reasons planning commissions and city councils oppose new construction. Its goal is to turn many of the state’s vacant shopping centers, strip malls, and commercial complexes into residential housing, which makes a lot of sense.
“But local zoning laws often don’t allow housing at these locations,” as KTLA reported. “Changing the zoning is such a hassle that many developers don’t bother trying. And it’s often not worth it for local governments to change the designations. They would prefer to find new retailers because sales taxes produce more revenue than residential property taxes.”
Note that the bill requires compliance with local standards. Yet a coalition of local governments has actively opposed the legislation, citing dubious concerns about local control. “The bill facilitates increased market-rate residential density but does not address affordability,” wrote Mike Griffiths, founder of a group of 427 local California elected officials. “This is the wrong time to target vacant land with a one-size-fits-all approach.”
There’s so much wrong with that statement. The best way to address California’s housing-affordability problem is precisely to allow more market-rate housing construction rather than simply subsidize “affordable” housing developments. More housing overall will increase supply and reduce prices up and down the housing ladder. Even former Gov. Jerry Brown noted that we can’t subsidize our way out of the housing crisis.
That’s especially true given the insane per-unit costs of subsidized developments, which can top $700,000 a unit after union work rules and other requirements are piled on. The bill highlights the dirty little secret of local government approvals. For years, California cities have discouraged housing construction, which they view as a net drain on their resources, and preferred retail and hotels, which fill their coffers with discretionary funds.
In 2004, I wrote a book about California’s redevelopment agencies, which were a root cause of the state’s housing crisis. Those agencies floated debt to encourage retail projects and would provide developers with tax rebates that encouraged the construction of shopping malls, big-box stores, and hotels, which provided sales and bed taxes. These locals pursued a one-size-fits-all approach to their vacant land, and now we’re all paying the price.
Brown shuttered those agencies in 2012 in the midst of a budget crisis. They had siphoned off a large share of the state budget given that the state was required to backfill property taxes that would ordinarily have gone to public schools but went to the redevelopment agencies instead. Nevertheless, cities still have the same old mindset of promoting retail centers and discouraging condos and homes.
The other obstacle has been labor unions, which only want new projects built with union labor. That drives up their cost, of course, and limits the type of projects that developers will pursue. As KTLA added, the proposal (and a similar Assembly measure) “has divided labor unions and affordable housing advocates,” with the unions apparently winning. They killed a previous bill that would not have required union labor, the article explained.
SB 6 not only gives in to that union demand but also doesn’t do anything about the California Environmental Quality Act (CEQA), the 1970 law that delays or blocks the construction of just about everything by encouraging opponents to file lawsuits.
“Attracting enough private capital to meet California’s housing needs involves many other factors, such as the availability and cost of building materials, supplies of construction labor and [CEQA’s] burdensome processes,” CalMatters columnist Dan Walters noted. “Some factors are obviously beyond political control, but [Gov. Gavin] Newsom and legislators have been reluctant to deal with those they can affect, such as CEQA reform.”
The state’s initiative process also allows locals to put housing projects on the ballot, although a San Diego Superior Court ruling invalidates a referendum on one Oceanside project and could have statewide ramifications. I’m all for a boisterous initiative process, but I oppose letting the public vote on private development projects. As the old saying goes, democracy is two wolves and a sheep voting on what’s for dinner.
We’ll see how SB 6 fares, but it’s clear that California won’t be able to address its housing crisis as long as unions, environmental activists, local governments, and NIMBYs retain so much power.