California Housing Plan Is a Dud, but Local Rules Are the Biggest Problem
Perhaps it's time to stop waiting for Sacramento, and start pressuring local governments to soften their regulatory restrictions.
Perhaps it's the sign of Capitol hubris, but lawmakers in the waning days of the legislative session touted their "housing package" as a big part of the solution to California's ongoing housing "crisis." It's an actual crisis.
Prices and rents are so high that they lead to an exodus of our kids to lower-cost states. It depresses job creation, as companies avoid locating in places where their employees cannot afford to live. Housing is the prime reason California has the nation's highest poverty rate, at more than 20 percent, using the Census Bureau's cost-of-living-adjusted measure.
But it didn't take long before "experts" recognized what this columnist confidently predicted: The trio of bills, which were signed by the governor last Friday, will do little to fix things. "Housing experts say" the legislative package "is the most ambitious move the state has taken in decades — and perhaps ever — to address the issue," reported the Sacramento Bee. "Even years down the road, the measures will not stop rents from increasing or home prices from trending upwards."
The San Jose Mercury News paraphrases the results of a new UCLA Anderson Forecast: "California appears unlikely to be able to build enough homes in the coming years to put a meaningful dent in skyrocketing housing prices triggered by a shortage of affordable dwellings." The state, it concludes, needs 20 percent more housing to reduce prices modestly. That's not going to happen, with or without the housing package.
The housing plan will boost supply by throwing tax dollars at high-density low-income projects. One bill reduces some regulations—but only for certain projects that pay inflated union wage rates. It will help a little and then hurt a lot. As someone who has long covered local government, it's clear the main problems are city hall and your neighbors. Whenever I write about housing, people send nasty notes. They are tired of congestion and don't mind squelching new development.
Congestion is awful, indeed. It would be easy enough for me and my fellow homeowners to just enjoy what we have and lobby local officials to curtail new housing proposals. It makes no difference whether we do this to, say, preserve open space and the environment (if you're a liberal) or protect the rural or suburban character of the community (if you're a conservative). It all comes down to using government to protect our current lifestyle. But that means our kids are more likely to move to Nevada or Texas so they can also have a shot at the American Dream.
Local restrictions really need to be rolled back. For instance, the Sacramento-based Pacific Legal Foundation, a pro-property rights public-interest law firm, is petitioning the U.S. Supreme Court to review West Hollywood's affordable-housing fees, which mandate that developers pay into a low-income housing fund in exchange for getting permission to build new units. The costs are so prohibitive that it stops new development. This is reflective of a statewide problem.
"The city literally thanked the developer for adding 11 units to the neighborhood and then demanded a roughly $550,000 fee to subsidize affordable housing as a condition of the permits," said Larry Salzman, a PLF senior attorney for the case. The group cited the Takings Clause of the U.S. Constitution in challenging "a government's authority to use the permit process to force private property owners to dedicate private property to a public use."
The city's "inclusionary zoning" law is counterproductive. It forces developers to pay for below-market housing to get approval to build market-based housing. It's ludicrous to punish a developer for the city's lack of housing supply when that developer has proposed a project that will add to the supply. Yet the California Legislature this session also passed a bill that encourages localities to impose similar mandates on rental construction. No one would accuse state legislators of having an abundance of economic understanding.
The Pacific Legal Foundation also is representing a Marin County couple that was hit with a $40,000 fee in exchange for the right to split a lot, which would then be available for building. The legal issues are similar, in that individuals are being forced to foot the bill to help ameliorate broad societal problems. It's not a huge case, but these types of rules and fees discourage new construction.
Proposed mega-developments — such as the 21,000-unit Newhall Ranch project in the Santa Clarita Valley — get delayed for decades, which suppresses supply in a big way. But it's a frequent occurrence for small-lot splits and 20-unit projects to get killed or delayed. Often, such projects never get proposed in the first place because of all of the fees.
The Legislature applied itself to the housing crisis, yet many experts believe that lawmakers' solution won't fix much at all. Perhaps it's time to stop waiting for Sacramento, and start pressuring local governments to soften their regulatory restrictions.
This column first appeared in the Orange County Register.