Is There Hope for CA’s Affordable Housing Future?

Timothy L. Coyle
Consultant specializing in housing issues

Can anything be done in California about its chronic housing crisis? Yes, say the academics and other experts. They conclude that the state suffers a chronic housing crunch because it doesn’t build enough annually. So, like newly minted Governor Newsom, they say just construct more housing each year.

But, a key constituent disagrees. Californians, it turns out, don’t believe the state’s housing crisis is caused solely by a lack of production.

A new poll suggests the public thinks the primary reasons the state has a stubborn housing problem is a lack of rent control, inadequate funding for increasing affordable stock and runaway environmental regulation. Rounding out their top eight reasons were:

* • Competition with foreign investors;
* • The influence of the wealthy tech industry;
* • Too little building (they do believe it’s a factor);
* • Intrusion of Wall Street buyers; and
* • Restrictive zoning rules.

If the public had their way, the state would be in worse shape than it’s already in. Take their top priority reform – rent control – and its effect on housing supply:

* • First, by limiting how much an investor can charge for a housing unit, rent control strangles profitability and discourages housing investment. So, why would an investor put his or her money in real estate? Why build rental housing? Or, why not sell?

* • Secondly, rent control accelerates the deterioration of existing neighborhoods. If a property owner is prohibited by a limit on rents from charging for, say, a new roof, new windows or other deferred maintenance why make those improvements to the property if the owners are unable to recover for them?

* • Thirdly, since few rent control policies are means tested, anyone can benefit. Wealthy renters can beat out lower-income households for rent-controlled units – there is usually nothing from stopping them. Instead of qualifying for the unit, poor people often get turned away.

* • Fourthly, most rent control policies cover single-family housing, the majority of rental housing in California. What do you say to the citizen-rent board when it says the rent you want to charge for the single-family home you own – or acquired – is too high?

* • Fifthly, to own a rental property many Moms and Pops borrow money they plan to pay back with rent revenue. Rent control, by definition, caps that revenue, placing a limit on the owners’ investment – and, likely, new housing ventures.

* • Lastly, occupants of rent-controlled housing might consider the value of lower rent to be so attractive that they refuse to leave – possibly using up more living space than they need.

After rent control the public’s “to do” list is ostensibly impossible to accomplish. First of all, to fund its way out of its lower-income housing deficit would bankrupt the state and, secondly, to win needed environmental reforms won’t happen for a very long time. Aside from setting a housing production goal, the other fixes are virtually unattainable.

Poll respondents don’t blame cities and counties – in whom all project-approval authority rests – for California’s housing problems, either. Of those surveyed, only nine percent identified overly restrictive zoning rules as a primary cause of the state’s affordability and supply problems. Most developers don’t necessarily agree with that. Localities are off the hook, as well, in meeting their supply goals – just four percent of California’s 539 cities and counties are on track to meet them, which is just the way it ought to be say 69 percent of residents.

Carolyn Coleman, executive director of the League of California Cities, said she isn’t surprised by the poll results. “This affirms what has been true for many years,” Coleman said. She said state officials should consider mayors and city councils as essential partners in fixing California’s housing problems instead of trying to take power away from them. “Residents put most of their trust and faith in local leaders to address these issues.”

This is true. It seems more and more the local attitude toward any intervention of the state is simply “keep out of our business”. How long this hostility will prevail is anybody’s guess. However, locally is where the escalating costs of housing continue to pile up, making housing less affordable – so something has got to give. Moreover, as keeper of California quality of life, the state has certain responsibilities and right now none of its housing goals are being met.

“Part of the reason we aren’t adding supply as fast as we need to or as densely as we need to is because of local resistance and the relationship between the local elected officials and their constituencies,” said Carol Galante, faculty director for the Terner Center for Housing Innovation at the University of California, Berkeley, and one who favors more state intervention. “Nobody has the motivation to make these hard choices.”

State Senator Scott Wiener (D-San Francisco), a genuine housing advocate and new chairman of the newly formed Senate Housing Committee, is surprisingly optimistic, though. Wiener, who has reintroduced this year his controversial zoning bill, said while development stirs a range of conflicting emotions – that compel people to, at least initially, oppose a project – he sees the poll results as a sign that state officials and activists simply need to work a little harder to persuade the public that building needed housing is a good thing. “It’ll take time for public opinion to move, but I think we’ll get there,” he said.

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