Capitol Housing Battles Ahead

Timothy L. Coyle
Consultant specializing in housing issues

It had to happen.  California is suffering through one of its worst housing crises and all the while the state legislature is doing nothing to solve the problem.  In fact, based on the numerous pieces of legislation introduced before the curtain went down for such proposals last month, they’re making things worse.

Inadequate supply.  By nearly all accounts, these two words define California’s chronic housing problem.  California is home to roughly 13 percent of the nation’s population, and has slightly greater than average population growth.  Yet, over the last 20 years the state has accounted for only eight percent of all national building permits.  Consequently, the state is short on supply and, correspondingly, has the nation’s most unaffordable housing markets.

There are several pieces of legislation proposed in 2017 to deal with the state’s housing crisis.  A large number of them are, for example, being advanced as “spot” bills – with the substantive contents due later – so we don’t know yet what’s intended by them.  Many of those bills promise to amend the state’s housing element law, which is intended to obligate local governments to plan for more housing.  Underlying the housing element law is the state’s good intention to take control of the housing problem and insist that local governments comply.

Notably, however, housing element law is the greatest of toothless tigers – containing next to nothing to enforce the law.  Even with today’s dire housing circumstances, the prospect of anything meaningful passing this legislature that would overcome California’s doctrine of local control is right next to zip.  And, that’s probably the way it should be.

Housing markets function well when left alone to the private sector and the proper signals are left free to be sent – to developers and to consumers.  First, a developer, who has some sense of the housing potential in a given market, begins his or her prospecting – for sites, primarily, in the right location.  Find the right location and housing type to go on it and you can keep the remunerative proceeds, the theory goes.  Coincidently, the signals coming from local government are all-determinant as to what gets built.  The right signals produce the most housing.

And, the signals to consumers that new housing send are supreme.  They are the ultimate.  They produce the goal on which lawmakers and policy-makers should be concentrating their 2017 legislative efforts – increasing supply.  Instead we have over 150 bills this year, none of which help accomplish this great goal.  Absolutely the wrong signals.

This year’s housing package includes:

  • A bill to authorize cities and counties to mandate the inclusion of affordable housing in connection with all new housing construction.
  • A bill to require a 20% or more surcharge be placed on the construction of new housing by requiring the payment of prevailing wages.
  • A bill to restrict the use of unimproved, vacant urban land to agricultural purposes.
  • A bill to cite new construction for greenhouse gas violations.
  • A bill to set new rules for building housing for artists.
  • A bill to require installation of landscaping water meters on most housing in two years.
  • Still another bill to force “incentives” on builders to produce higher-density development.

That’s just a brief sampling of what’s in store for housing producers this year.  Sound like nibbling around the edges?  They do, indeed.  Largely, not helpful?  Yes, not helpful.   And, there is a whole lot more that doesn’t get much better.

The biggest insult to the seemingly forgotten goal of increasing California’s housing supply, though, is AB 1506 by Assembly Member Richard Bloom of Santa Monica.  AB 1506 would repeal the now 21-year-old state law (Costa-Hawkins) that pre-empts local rent control.  The bill would send absolutely the wrong signal about housing in California – don’t build here.

Repealing Costa-Hawkins is anathema to a fully functional state housing policy.  The re-institution of rent control is nothing short of the Legislature saying that when it comes to housing, there’s zero return on your investment.  That’s right:  government will under rent control say how much you can make on your housing investment.  And, it may just mean that “your project just simply doesn’t pencil out” at all.

Clearly, the bills introduced by the state legislature this year won’t solve California’s housing problem.  Indeed, they are bound to make things worse.  It’s hard to believe, but on top of its zoning restrictions, stratospheric development fees and CEQA as the ultimate land-use constitution, California proposes to add all sorts of bells and whistles – and rent control.

That the Legislature would seriously consider any of these silly ideas is inexcusable.

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