After taking their recent cap-and-trade victory lap, the Governor and Democrats in the Legislature pledged to fix the state’s housing problems next.  When I heard this I wasn’t surprised, politically – the pressure is on for them to do something.

California’s housing shortage is catching up to the mighty Golden State.  McKenzie and Company reports the severe housing supply shortage and corresponding affordability gap is costing the state $140 billion a year in lost investment and consumption.  UCLA says the average state resident is spending far too much of their income on housing.  California’s own Beacon Economics says the state’s inventory should be much larger than it is and housing markets ought to be left alone to work.

Indeed, “something” isn’t always the best answer.  The problem at the state Capitol is that certain lawmakers think more is better and are, unfortunately, poised to enact new government fixes that do much more.  Of that, the private sector needs to be afraid, very afraid.

After all, who gave us rent control?  Government, that’s who.  How about affordability mandates (aka inclusionary zoning)?  Government.  Ellis Act and all of its restrictions?  You got it; that was government too.  Even well-intentioned initiatives, like the state’s nonsensical housing element law or the increasingly arcane density-bonus law, were Sacramento-inspired.

And, the mother of all government-sponsored obstacles to development?  CEQA?  Yes; brought to you by state government.  And, please note that with CEQA the situation is getting worse as more rules and regulations get written in Capitol corridors and more judges in municipal and appellate courts interpret the law.

Sacramento just can’t shake the impulse to lather big problems with more government.  Most lawmakers are well-intentioned and just can’t avoid the temptation to have new laws address every possible outcome.   Some, however, are more diabolical and want to make it harder and harder for the private sector to prosper in California.  A cynic might say in making the laws so rigid and unforgiving, legislators are just angling for more power – to force developers to line up to beg permission to build.

If government really wanted to see the state’s housing condition improve, it would adopt laws and policies that are designed to encourage the private sector to systematically build more.  It doesn’t take much – as long as the focus of what is considered is based on what private developers need.

Here are a few ideas:

  1. Restore redevelopment. If there ever was a steady source of revenue for the construction and rehabilitation of affordable housing it was redevelopment.  What’s more, it didn’t cost the state a nickel.  It turned non-performing, low-property-tax-generating real estate into income-producing local assets.  It’s long past time to bring redevelopment back.
  2. Scrap the state’s housing element law. Today’s law is simply a paperwork nightmare, and a “compliance” burden for locals that doesn’t produce any new housing.  Replace the law with a real incentive for new housing approvals – like new infrastructure bucks.
  3. Abolish affordability mandates (inclusionary zoning). By way of local ordinance, before a development can be approved, builders must agree to set aside a number of deeply discounted homes or units – financed by the builder.  These requirements produce little affordable housing and simply drive up the cost of the market-rate housing.  Instead of trying to engineer neighborhoods, locals should simply charge a fee, the proceeds of which would be placed into a fund that, when it gets big enough, can serve as financial leverage for new affordable housing production.
  4. Limit local permitting fees. State law (AB 1600) was enacted years ago to put a (nexus and cost) check on local permitting fees.  Now those fees well exceed $120,000 per home and are growing higher.  The state – through the Governor’s Office of Planning and Research or through the Department of Housing and Community Development – needs to reassert itself on fees and enforce the law.
  5. Repeal CEQA. Yosemite is saved.  The state’s coastline is saved and so are its forests.  CEQA has done its job and except for being the biggest burden on new development, it’s outlived its usefulness.  Want an environmental check on new housing?  Enact a new law.