Abuse of the California Environmental Quality Act (CEQA) has exacerbated the state’s housing affordability issues by making it more difficult and more expensive for developers to bring homes to the market. In particular, the law has been used to stymie high-density and in-fill housing projects that would help ease housing affordability, and those objections aren’t really about environmental impacts but are simply a NIMBY reaction.
In addition, regulations like the state’s residential solar power mandate and the potential imposition of an indirect source rule on housing projects by the South Coast Air Quality Management District will make housing even less affordable by increasing the costs of creating new housing—costs that will be passed on to buyers and renters.
All layers of government must continue to streamline processes to reduce the costs and time to construction approvals. California’s building code is waist-high, no wonder it takes upwards of 3 years to bring a housing project to fruition. Every city should be required to build their fair share of housing across price-points and city councils need to make tough decisions to ensure we can expand housing – it can be done while protecting local neighborhoods and local control.
Another missing piece of the conversation is how cities can meet affordable housing needs, after the collapse of redevelopment. While the state and local governments have made some progress rebuilding funding streams, the progress is not enough to make up for years of backlog and plan for projected needs.
The federal government must reevaluate affordable housing subsidies and social security levels to ensure they are appropriate for actual housing costs. The state government must streamline the building codes and continue to release incentive programs and policy that pushes diverse and obtainable housing.
Private businesses and non-profit partners, need to work side-by-side with governments to deliver development projects that are responsible to local communities, minimize the impact on the environment, and bring innovative projects to fruition.
The City of Riverside recently brought home more than $32 million to fund the construction of affordable housing. These units are an important piece of our strategy to house veterans, hardworking families, those on fixed incomes, and neighbors without homes. We must continue to push forward to expand diverse housing options, not only for our most vulnerable, but also to avoid a situation where we all become “Skype grandparents”. If we do not address this carefully, our children will be left with no option but to move out of state, contributing to disconnected families and urban sprawl.
When it comes to the lack of affordable housing in Southern California, there’s been a failure to seriously address the crippling effect which government overregulation has on new housing construction. Most notably, policymakers have avoided making a sincere effort to reform the California Environmental Quality Act (CEQA).
Originally enacted in 1970, CEQA was designed to ensure that environmental protections were instituted with new development projects like infrastructure and housing. Unfortunately, CEQA has evolved from a tool into a trap, ensnaring practically all new housing, regardless of how environmentally friendly or locally necessary. CEQA lawsuits have become the weapon of choice by parties intent on stopping the construction of both permanent and temporary housing.
From senior retirement communities to homeless shelters, hundreds of CEQA lawsuits have destroyed community hopes for sorely needed new housing. Even respected nonprofits such as Habitat for Humanity have been the victim of frivolous CEQA attacks. The refusal by lawmakers to make common sense reforms to CEQA was one of the primary reasons the Building Industry Association of Southern California formed the Building Industry Legal Defense Foundation, which actively works in the courts to protect home builders from frivolous, anti-housing litigation.
Building new homes is far more than a business issue – it’s a quality of life imperative. Ultimately, there is only one way out of California’s housing crisis, and that’s to ensure that home builders can do business in a regulatory environment where actual construction can take place. This must begin with a serious effort by Governor Gavin Newsom and the state legislature to mend – not end – CEQA.
A 2018 Pacific Research Institute study found that in a survey of 200 CEOs with businesses looking to expand in California, nearly nine in 10 cited the cost of housing as a significant factor in their decision-making.
California’s reputation of being a difficult place to do business is not new, but the housing shortage adds another dimension.
Challenges of affordability not only impact individuals and families when it comes to housing itself, but it also has a detrimental effect on economic opportunity.
While much of the time, the housing conversation centers around specific income thresholds, there needs to be a greater discussion on expanding all types of housing.
If California is to remain an economic engine, it is just as important to have housing stock at the middle of the spectrum as it is at the lower end so that it can free up housing options for individuals and families of more modest means to enter the market and realize the dream of homeownership.
The biggest obstacle to increasing housing is government, both at the local and state level. Abuse of state environmental laws can delay projects as much as three to seven years. On average, a three-year delay could add $67,000 to a home’s price with a seven-year delay adding over $200,000.
Local permitting fees on new developments also drive up costs. In some parts of the state, they can add $150,000 to the price of a home before it is even built. While nationally, the trend has been to see these fees decrease, in California they rose 2.5 percent between 2008 and 2015.
It is often pointed out that California’s economy is the fifth largest in the world, but if it fails to adequately take on the housing issue, that economic status could be in jeopardy.
The government’s role is the problem, not the solution. The effect of climate-related regulations on housing construction is the subject of a lawsuit against the California Air Resources Board by a group called The Two Hundred, a statewide coalition led by civil rights and social justice advocates. The lawsuit notes that “California’s climate policies guarantee that housing, transportation and electricity prices will continue to rise, while ‘gateway’ jobs to the middle class for those without college degrees, such as manufacturing and logistics, will continue to locate in other states.”
CARB is an unaccountable public agency that makes and enforces regulations most Californians don’t know about, and yet these rules and hurdles prevent housing construction that regulators consider to be unacceptable suburban “sprawl,” even if homebuyers might consider those potential communities to be an ideal and affordable place to live.
The state government’s insistence on urban infill instead of exurban growth is driving up the cost of housing. Is it worth it? All of California accounts for only 1% of global greenhouse gas emissions. How much should Californians be made to suffer in order to reduce those emissions, and at what point do Californians have the right to ask if these state climate policies meet any reasonable test of cost-effectiveness?
We never talk about how much what is acceptable to pay for housing. In other words we should talk about what are acceptable rents (should simple studios be $750 a month, 2 bedrooms, $1,500, 3 bedrooms $2,000) and anything above that should be justified. There are apartments in some of the most poverty stricken areas of South LA that are asking for $2000 for studios. How are we regulating rent costs and not letting the market make housing inaccessible to most residents.
The public conversation has been framing the affordability problem the wrong way. As usually stated, the implied need is for subsidized housing so that people can pay no more than 30% of income on rent. Yet 60% of SoCal renters are paying more than 30% of their income on rent, and even 48% nationwide have this excessive rent burden, so truly massive subsidies would be required to address all these people. Those tax dollars do not exist, and what little we do have must be allocated to deep subsidies targeted to worst case needs. The only mass solution that will be affordable to government and in the eyes of the voters is to increase the supply of newly built housing to the more-normal levels that pertained before the recession and in earlier decades. That infusion of new supply will stem further increases in rents and may even produce small decreases within a year or two.
Over the longer term a larger supply of high quality new units will press downward on asking rents in middle and lower price brackets. After a decade, even the newly built units themselves will decline in rent. Market-rate new construction will filter down in larger quantity than the number of named “affordable” units that we provide through direct subsidies. More subsidized units will still be needed for households with worst case needs, but a mass quantity of new housing is needed to address the widespread affordability problem. To stimulate this production, the federal tax code needs to offer incentives to developers to build non-luxury housing. In addition, the state government needs to offer incentives and penalties to municipalities to expedite building permit approvals for a fair share of the housing needed in each metro region.
There are several things missing from the discussion. People needing subsidized housing are not failures, lazy or undeserving. They are households whose employment does not pay the level of wages required to afford market-rate housing in Southern California. What’s missing is an understanding of who needs help in affording housing, how key these households are to quality of life for the rest of us and how they contribute to our economy. What’s missing is an understanding of how land-use decisions impact affordability and availability of housing near jobs. What’s missing is the interconnection of affordable housing, transportation, environmental, health, education and social outcomes.
The critical issues facing this country at the moment has really focused my mind on what it is that we are not doing right? In the immigrant rights movement for example, we have for as long as I can remember talked about the idea of serious “intersectional”/cross sector approach to our work but much of this is not operationalized. We are still very much silo-ed as a social sector.
When I was working at the United Nations, we did a major shift in humanitarian programming by operationalizing the idea of “mainstreaming.” The notion of assessing the different implications for people or sectors of any planned policy action, including legislation and programmes, in all areas and levels, meant that we looked at social problems and their relationship to social programs wholistically. Closer to home, the fight to provide health care to undocumented immigrants for example would not be so fraught if we had mainstreaming in mind when we designed our immigrant integration programs and their interaction with the state’s health care system.
The issue of housing affordability can be tied directly to economic justice. Liberty Hill recently co-published a report entitled Priced Out, Pushed Out, Locked Out: How Permanent Tenant Protections Can Help Communities Prevent Homelessness and Displacement in LA County.
This report describes how tenants across unincorporated LA County are facing larger rent increases, higher rent burden, and more evictions than ever. With a population greater than one million, more than half of Unincorporated LA County residents find themselves rent burdened—spending 30% or more of their income on rent. And the problem is growing.
While rents and costs of living have skyrocketed, wages have largely remained flat. Since the year 2000, median rent in L.A. County is up 32% while median renter income is down 3%.
To afford the average $1,791/month “fair market rent” for a two-bedroom apartment in L.A. metro, tenants in unincorporated LA County would need nearly three full-time minimum-wage jobs — a 115-hour workweek.
That’s why Liberty Hill is standing with tenants unions and activists across the County to urge our Board of Supervisors to enact a permanent rent stabilization ordinance that prevents extreme rent increases and no-fault evictions.
We know addressing our housing crisis long-term will require building more housing. Yet we need immediate relief for families who are struggling right now. Fortunately, our board of supervisors has enacted a temporary rent freeze and will consider a permanent policy this September.
Additionally, in more than seven other cities throughout L.A. County, tenant activists and organizers are leading rent control campaigns, building momentum, and winning. Inglewood just enacted a new permanent rent stabilization ordinance and Culver City recently passed a temporary rent freeze. These successes have been years in the making and are the result of tenant leaders hard at work building power in their communities.
There are three main opportunities. One is to take advantage of the coming tsunami of redundant retail space that can be converted into all kinds of housing, from patio homes to townhouses and larger multi-family. This can be done without much new infrastructure and destroying existing middle income neighborhoods. The second is to build on a surprisingly large number of undeveloped lots, even in LA city. The third, and most important, would be to make it easier to open up development, and land markets, on the periphery, where we have traditionally built family friendly homes. This would help reduce the high land costs that hurt development in both cities and suburbs. Finally, we need to look at changing tax laws so that localities have incentive to build housing rather than chase retail dollars.
What’s missing is a recognition that this is a problem deeply embedded in our contemporary economy. The growing level of income inequality means that those of means can easily price others out, particularly in areas that are jobs- and amenities-rich. The growing reliance on a knowledge economy also means a clustering of talent and a hike in highly specific housing market pressures. This is all on steroids in the Bay Area – where if a family with two full-time minimum wage earners (even at our state’s higher minimums) lost their current place, they could afford to live in only five percent of the nine-county region’s neighborhoods. But we are facing many of the same pressures in Southern California, particularly as seek to grow our tech-related industries.
So everyone needs to step up. The federal government could help the region by dramatically stepping up Section 8, the program designed to help poor renters bridge the affordability gap – but I wouldn’t hold my breath waiting for assistance from an administration whose main housing innovation seems to be caging would-be refugees. The governor backed off tying transportation money to the creation of affordable housing – but it would be a good idea to increase the incentives for localities to plan, zone, and build such housing. The state assembly and senate should pass a bill allowing for new local rent stabilization ordinances and tenant protections, as well as more funds for affordable construction.
Localities must overcome the NIMBYism that is preventing affordable housing from being located in more opportunity-rich neighborhoods. The private sector (beyond developers) should play a role; while Google’s recent $1 billion pledge to build affordable housing will have a modest impact in the Bay Area crisis, it points to leadership opportunities for the broader business community.
Although the lack of housing stock and high demand for housing in SoCal is widely recognized, a lessor-known factor in the cost of increasing affordability is the high cost of building in the State of California. As we take steps to increase the development of additional housing units across the region, the conversation must include the disproportionately high burden of fees levied by the state and local governments, which studies have placed California at as much as three times the cost to build in other parts of the country. High fees and restrictive building restrictions not only impact the cost to build, but also the cost to consumers in both purchase and rental prices. CEQA, or the California Environmental Quality Act, must also be seriously evaluated in order to prevent misleading law suits solely intended to slow or stop new development. Not only do these law suits reduce the pace of adding new needed housing units, but again, they can result in increased costs for legal fees and as the building timeline is extended.
Additionally, according to a recent study by the California Housing Partnership, 79% of low-income households are spending more than half of their income on housing costs, and renters in LA County must earn three times the minimum wage to afford the median monthly rent. Clearly, the conversation around housing affordability must also consider employment opportunities, workforce preparation, and the expansion of middle-income jobs that allow a family to maintain a suitable apartment or home where their children can thrive. And, looking at demographic trends, we know that the silver tsunami is hitting our country as baby boomers are retiring and aging. For low-wage earners, maintaining stable, affordable housing into their later years will continue become a greater issue and needs to be introduced into today’s housing conversations as we anticipate future needs.
The first question to tackle is do we owe people “affordable housing?” Decades ago thousands relocated to the inland regions seeking lower cost housing. They traded a longer commute to higher paying jobs for lower housing costs. Now, the inland housing values have gone up and there is a hue and cry for affordable housing. Affordable for who? Should taxpayers, presumably those who sought cheaper inland housing, pay for others to have affordable housing near them? How is that fair? What has driven the prices so high? Is it overregulation? Is it building policies based on NIMBYism?
Maybe we should dig deeper and analyze the underlying cause of the high home costs. Is the demand too high for the available supply? If so, how do we fix that? There is a push to build more affordable housing. Define affordable and determine why the market is so high. Private sector developers and builders have no incentive to build unsubsidized lower cost housing when the rents are high and there’s a huge demand for housing – any housing. Unless the taxpayers subsidies the housing, builders cannot afford to build “cheap” housing. Cheap housing can eventually lead to lower overall property values and depreciate existing housing markets. Discussion must address these topics.
Government needs to reform planning processes that have been in place decades to serve a population in California from 50 years ago. This is a primary cause of the affordability crisis as we have simply not built the housing to accompany our population growth. Governments also need vigorously enforce housing discrimination laws as discrimination increases costs for many vulnerable families and individuals. Coincident with changes in planning policies, workforce housing will become profitable for developers to build again. Nonprofits and philanthropy can work with governments to help increase housing stability for households that earn less than 50% of AMI (Area Median income).
There is a growing realization that California’s housing crisis is fundamentally a supply problem, but too many of the commonly proposed solutions fail to address the issues that discourage homebuilding in the state – and many would even make things worse.
Soaking taxpayers with expensive housing bonds will only add to their cost burdens, and making housing less profitable through rent control or affordable housing mandates only inhibits the investment needed for more housing. Even government-funded “affordable housing” developments average about $425,000 per unit, and can reach $700,000 or more per unit.
The state and local governments should, instead, simply remove the obstacles they have put in place that have driven up land and construction prices so much. Restrictive zoning limits the amount of land that can be developed, thus driving up prices, and has been used to discourage more affordable options like boarding houses. Development fees average more than $23,000 per single-family home – about three times the national average – and can be much higher in certain areas, topping $60,000 per home in Oakland and totaling roughly $150,000 per home in Irvine and Fremont. Prevailing (union) wage mandates drive up construction labor costs by as much as 30 percent. The California Environmental Quality Act has been used to squash or tie up developments for years and “greenmail” developers into adopting prevailing wage requirements and extract additional amenities and other concessions, further discouraging homebuilding. Excessive building code requirements also add to home prices, and the solar roof mandate, beginning next year, will likely add another $10,000 to $20,000 to the cost of a home.
Getting rid of so many taxes, fees and regulations – which easily account for one-quarter or more of the price of a new home – would bring down housing costs substantially and spur the development needed to meet demand.
The factors leading to increased housing costs and their effect on affordability are discussed quite a bit, as are exhortations for government to provide programs that assist people or projects to address their needs. However, there is little discussion regarding the fact that, given the wealth gap in the country and state and the number of people living in poverty, government cannot afford to buy its way out of the problem. Nor is there much discussion about government’s role in growing the economy and creating higher wage jobs and providing the education and training to perform them – which would also result in greater affordability.
Local government fees and charges to pay for infrastructure and services are often mentioned as adding to the cost of housing. This approach to funding these items is a direct result of the restrictions on raising local revenues imposed by Propositions 13 and 218. Prior to these initiatives, local government could and did raise property taxes to pay these costs instead of passing them on to homebuilders and homebuyers.
The state construct for local government funding produces perverse incentives and inequality in funding. Property is taxed at 1% of its value, capped by Prop 13, then voter approved overrides are added. Cities, the counties, schools and special districts split the money from the 1%. The amount that cities receive varies widely. In San Bernardino County it ranges from 1.75% to 38.8% of the 1%. Each city also receives one of the percentage points from the sales tax on transactions in their jurisdiction. This has led many cities to seek sales tax generators rather than housing. Providing local governments, a share of income taxes from their residents and those working in their businesses would change the incentives.
Regulation and taxation are rarely discussed. I’ve seen few clearer illustrations of that one-sided debate than in the recent gubernatorial race. Gavin Newsom talked about producing more “affordable” housing through government spending and lawsuits against cities failing to do their fair share; John Cox, a home builder, underscored the high regulatory costs of construction. I’d add that property taxes, driven by public employee unions, make housing even more expensive. We can all point to countless examples in California of nonprofits and government creating “affordable” housing that is more costly than nearby market-rate housing. Instead of commanding the creation of new housing, government must deregulate, allowing the market to produce alternative housing that meets the ability to pay of buyers/ renters at every income level. And government should focus on quality infrastructure, sustainable public finance, and low taxes.
Solving California’s housing crisis isn’t as simple as making it easier to build homes by eliminating red tape, reducing fees, or strategies that singularly aim to provide more homes in job-rich areas.
200,000 residential units are already entitled in Western Riverside, yet only 25,000 have been built in the last five years. More homes are not being built in part because the kind of economic growth conducive for home-buying in this area has remained relatively stagnant. Jobs growth is predominantly in the retail, hospitality, transportation and warehousing sectors, which are generally characterized by lower-wages that make it difficult to support higher numbers of home purchases. While home prices here have climbed back to pre-recession levels, family incomes have actually decreased since 2012.
Bringing higher-paying jobs to inland areas should be a central pillar of the State’s housing crisis solution. The State should implement incentives that increase economic opportunities within this region. The Governor has proposed providing $500 million in incentives for localities to create new housing and $250 million to provide technical assistance to ramp up local jurisdictions’ zoning and permitting processes. For areas that are jobs-poor like Western Riverside, these funds should instead be utilized for economic development focused on bringing higher-wage jobs here. This will have the effect of boosting income levels in the region and unleashing some of the backlog of the region’s already entitled homes.
Additionally, the State should increase funding for technology incubators and accelerators, which promote local entrepreneurship and business growth. The State could also implement changes in the tax code to encourage home ownership. For example, the State could expand deductions and credits for first time home buyers, and expand existing programs that provide grants to first time home buyers to provide coverage for a wider range of persons at various income levels.
So much of the housing conversation tends to focus just on affordable housing, or housing for those under a certain average median income (AMI). But after decades on inaction, to create true affordability, we need to increase supply across the board. I’ve spoken to companies that struggle to find local qualified workers and employees who face brutal commutes to reach their jobs. Educators who are unable to live in the communities they teach and universities who train our brightest minds, only to see them leave the region for somewhere they can afford to live.
California has the nation’s second lowest rate of homeownership and more than 50 percent of renters are considered rent-burdened. Lack of supply drives high housing costs. With such a high percentage of income going to rents or mortgages, that leaves less investment in local businesses and the economy.
Government and the private sector must collaborate to address the barriers to the creation of homes, whether they be regulatory, cost inefficiencies or neighborhood opposition and fear. Communities up and down the state are investing in public transportation systems, making transit-rich, walkable neighborhoods the ideal place to increase housing density.
New housing is change for a community, and existing residents can be fearful of change as well as newcomers. But debunking the myths is important. For example:
–Will my property values go down? Not one study exists that building new housing decreases existing property values; in fact, some studies actually show the opposite.
–Doesn’t new housing cause traffic to worsen? In fact, more commute into OC to work than the other way around. Irvine’s population doubles every day because it is such a strong jobs magnet. Traffic congestion and longer commutes occur when folks can’t live near where they work, and when local leaders fail to plan. Houses are where jobs go to sleep at night.
–Our city is “built out”. In fact, no city is “built out” unless, perhaps, they have no children and no jobs. Every city can repurpose aging strip malls and retail sites for modern uses, including housing.
–Why can’t our children just live in San Bernardino (or wherever)? By state law, every city is required to plan for, and implement those plans, for growth in jobs and population. Sending “our children” and workers and teachers and health care providers and firefighters to “San Bernardino” means greater commutes, traffic congestion, poor quality of life.
–Why can’t everything just stay the same? Because innovation is happening every day, faster than imagined. Retail stores are giving way to online shopping. Entertainment preferences are different. The use of Uber, Lyft and other mobility technologies thrive in addition to a future of automated vehicles. An aging workforce remains, with retirees are living longer lives. Young families are relocating to more affordable areas. We can plan for change–and implement those plans–or that change will plan us! State government needs to get out of the way, streamline processes, develop environmental rules that are predictable, reward jurisdictions that are doing the right thing with new funding, and come down hard on those who choose to send their growth to others to deal with. Legislation is needed to limit ridiculous CEQA lawsuits that are used for contract leverage, not real environmental issues. Limit recovery in CEQA lawsuits to additional mitigation, not project “do-overs”. Local governments must cut the red tape, plan, zone and mean it, allowing builders ministerial permit opportunities.
The scarcity of affordable housing is in large part due to the add-ons local governments impose on developers, supposedly for the impact the new housing has on the community, but, in many cases, just for revenue purposes. Requiring a much tighter fit between the impact fee assessed and a measure of actual impact would reduce this factor that makes housing more expensive. Government should subsidize rental payments on a sliding income scale. Government should also contract with private builders to construct more housing eligible for the rental subsidies. Towns that are full built-out should be required to make a financial contributon to construction of eligible housing in locations that make sense for the needy populations. Permitting for such construction should be made vastly less cumbersome. Non-profits can also help with subsidizing construction.
While affordable housing for middle-income working people like teachers and first responders gets some attention, very little attention is paid to housing affordability/access for low wage workers – particularly those who are overcoming high barriers to return to or join the workforce (e.g. the populations served by REDF’s portfolio of employment social enterprises). The cost-benefit to society of keeping working people with low-incomes housed and employed should get more attention (e.g. reduced recidivism to incarceration, preventing/limiting the duration of homelessness). The Mathematica Jobs Study, for example, demonstrated that for every $1 spent by an employment social enterprise which employs individuals overcoming barriers to work, societal benefits total $2.23. University of Pennsylvania and other research has estimated that people who are incur $40,000 per year in public expense. The state has estimated the cost of one year in a California prison at $81,000.
Two approaches to housing people facing homelessness with low incomes are increasing temporary shelters and increasing short-term rental assistance. Shelters provide a concentration of support services and potentially prevent a dramatic decline in a person’s mental and physical health once they are living on the streets. Short term rental assistance provides financial support to keep people in their current housing situation. Currently, LA County has been overly focused on creating more affordable housing units and has lacked an interim support stage with shelters.
In light of the costs that are being incurred in part due to housing unaffordability, more attention should be focused on approaches which solidify the housing-employment virtuous cycle for people with barriers who utilize affordable housing. A challenge faced by affordable housing providers is the gap between below market rate rental rates they charge and the market-rate expenses to operate affordable housing units. One approach is to employ residents of affordable housing units through social enterprise to provide many of the front desk, maintenance and janitorial, and security services otherwise procured at for-profit prices.
LA:RISE is a partnership between city and county of Los Angeles with philanthropy and non-profit partners to employ thousands of homeless residents through social enterprise. This multi-year public-private partnership recently expanded to encompass bridge housing (A Bridge Home) through a temporary facility on City-owned properties to quickly bring homeless Angelenos off the streets and help them rebuild their lives. Bridge housing offers 24/7 security and on-site services like case management, mental health care, substance abuse treatment, and housing placement to help residents stabilize their lives, move on to permanent housing, and stay off the streets for good. The goal of the partnership between A Bridge Home and LA:RISE/social enterprises is to provide paid transitional employment opportunities and support services to residents.
What is missing in the conversation regarding affordable housing is the current cost per door to build housing in California and our local city councils reluctance to approve housing. Recent reports show that affordable housing costs are on average $400,000 per unit in the Los Angeles area. In fact studies have shown that as density increases so do permit fees. Costs. The California Code of Regulations, the California State Building Code, plus local zoning codes, regulations, and fees all drive the cost of building homes in California through the roof. When you add in the fact that bringing forward any housing project will draw the ire of residents throughout Southern California and that current elected officials don’t seem to have any backbone to solve the housing crisis you have a recipe for not enough housing in our region.