Three Major Hurdles to Fixing California’s Housing Crisis

Jeff Montejano
CEO, Building Industry Association of Southern California

Earlier this summer, Governor Gavin Newsom signed a $214.8 billion state budget that included $2 billion in new spending to address California’s housing and homelessness crisis. While Governor Newsom and the state legislature should be applauded for their efforts, we must also acknowledge that California cannot spend its way out of the housing affordability crisis that has engulfed the state.

There are no quick fixes when it comes to alleviating the state’s housing woes. California’s housing crisis is the result of decades of legislative and regulatory actions at both the state and local levels which have constrained, and in many instances outright stopped new home construction. If measurable progress on housing affordability is to occur, there are several key legal hurdles which must be overcome.

First and foremost, there needs to be a serious effort by Governor Newsom and the state legislature to mend – not end – the California Environmental Quality Act (CEQA). Signed into law in 1970, CEQA was created to ensure that certain environmental protections were in place with new development projects, such as housing. Despite its original intent, CEQA has evolved from a tool into a trap, ensnaring practically all new housing, regardless of how locally necessary or environmentally friendly.  

From senior retirement communities to homeless shelters, hundreds of CEQA lawsuits have crushed sorely needed new housing proposals. CEQA abuse has become so widespread that based on a study by the law firm Holland & Knight, between 2012 – 2015, close to 14,000 housing units in the Southern California region (minus San Diego) were targeted by CEQA lawsuits. 

Along with the need to reform CEQA, the state must also make significant changes to prevailing wage requirements for new home construction. Prevailing wage is essentially the average hourly pay for construction work within a specific geographic region, and it applies to a wide variety of trades including carpenters, electricians, and plumbers. 

Under state law, home builders are required to pay prevailing wage on most low-income housing developments receiving public financing, thus leading to a substantial increase in costs. A report from the California Homebuilding Foundation found that prevailing wage requirements can mean as much as a 37 percent increase in construction costs, which equates to about $84,000 for a typical new home. 

To avoid adding additional hurdles to housing growth, it’s imperative that any new prevailing wage requirement fully recognizes, with metrics, the economic realities of each geographic region throughout the state.

Finally, there needs to be an increased opposition against overly restrictive local land-use laws often adopted as a result of pressure by residents intent on stopping new housing. According to the California Building Industry Association, approximately two-thirds of cities and counties in the state’s coastal metropolitan areas have adopted growth control laws which severely limit new housing opportunities. 

In those cases where new housing developments are approved, residents will often seek to curtail new home construction by placing “slow growth” or “no growth” measures on the ballot. Cities including Costa Mesa, Thousand Oaks, and Redondo Beach are among several Southern California municipalities that have passed voter-approved initiatives which effectively limit new housing.

It’s because of these types of legal impediments that the Building Industry Association of Southern California formed the nonprofit Building Industry Legal Defense Foundation, which has worked tirelessly to protect the home building industry from laws and regulations aimed at preventing new housing.

There is only one way out of California’s housing crisis, and that’s to ensure that home builders can do business in a legislative and regulatory environment where actual construction can take place. 

Jeff Montejano serves as CEO of the Building Industry Association of Southern California. Headquartered in Irvine, the Building Industry Association of Southern California is a leading advocate for thousands of building industry leaders who are committed to a better future for California by building communities, creating jobs and ensuring housing opportunities for everyone.

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