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Every eight years, state housing regulators give cities and counties across California an especially dreaded homework assignment: Make a plan for a bunch of new homes.
Gov. Gavin Newsom’s administration assigns localities goals to hit at four different affordability levels. Collectively, the numbers represent the housing department’s best estimate of the number of new homes needed to match any expected population growth and to chip away at the state’s decades-in-the-making shortage of affordable places to live.
With these targets meted out to each region on a rolling basis, a massive chunk of the state, including all of Southern California, passed its halfway mark this summer.
So in the spirit of a midterm exam, how are cities and counties doing?
Bad news, California. If this were graded, the state would abound in Ds and Fs.
Less than a third of cities and counties are on track to permit enough “above moderate” units, the category that typically refers to market-rate housing, according to data submitted by locals to the state housing department.
The progress report for more affordable types of housing is even bleaker. Only 32 jurisdictions — less than 6% — are on track to hit their “very low” targets. That refers to housing within financial reach of anyone earning less than half the typical local income.
After years of nudging, political trolling and litigating, most cities and counties now have state-approved plans in place. But as the production numbers show, it’s one thing to plan and another to build. Almost nowhere in the state is actually seeing the new construction necessary “to meet the housing needs of all Californians,” as housing regulators have described these targets.
Only five jurisdictions in the entire state are permitting at a pace to hit all four income targets. Four are the lightly populated unincorporated bits of small, mostly rural counties: Plumas, Napa, Yolo and Mono. The fifth is Placerville, a town of roughly 11,000 people in the Sierra foothills east of Sacramento.
To be “on track,” a city or county needs to issue permits at a clip that, if sustained, would allow it to hit its state targets by the end of its planning cycle. State housing regulators told the city of Irvine in Orange County, for example, to plan for 8,671 market-rate units by 2030. Now halfway there, the city has issued more than 6,000, making it one of the minority of cities to be on pace to reach its target for above-moderate housing.
But for more affordable digs, Irvine, like most California cities, is far behind. The city has permitted just 9% of the very low-income housing needed to reach its target by the end of the decade. For the next most affordable category, which refers to units priced for those earning up to 80% of the regional median, it’s at a mere 3%.
What’s the housing hold up?
For anyone who has been monitoring the pace of new residential development in California over the last half century, the disconnect between housing planned and housing permitted won’t come as a surprise. The state’s total planning target adds up to nearly 2.5 million units over eight years, a reduction of the even more ambitious 3.5 million target Newsom set for his administration during his 2017 election. That 2.5 million figure works out to 312,500 new homes per year. Even during the state’s boomingest boom years in the early 1960s and mid-1980s, construction figures never reached such lofty heights.
This decade, despite a blizzard of state legislation and policy changes aimed at boosting the construction of new homes, the number of new homes built annually is still just north of 100,000.
Critics of the state’s planning process have long stressed that California’s targets are unrealistic and that local governments can only do so much.
“Cities cannot require developers to develop and cities don't build housing,” said Jason Rhine, a lobbyist with the League of California Cities. You can lead a developer to a rezoned plot of land, in other words, but you can’t make them build.
Pro-development advocates counter that the uninspiring production numbers suggest that cities still aren’t doing enough to welcome more housing.
“Cities can argue that they don't directly control production, but they do control fees, zoning and permitting,” said Laura Foote, executive director of YIMBY Action. The housing needs allocation process “is only as good as we have the political will to actually hold cities accountable.”
Foote directed some of the blame at state housing regulators for failing to compel cities to adopt more development-friendly policies.
In a written statement, housing department spokesperson Jennifer Hanson said regulators are “actively monitoring and enforcing” the commitments each jurisdiction has made in its housing plans. She also pointed to a couple of recent laws exempting many urban housing developments from environmental litigation and requiring local governments to allow for taller buildings near major public transportation stops. Both have already been used to “advance approved projects representing thousands of proposed homes,” she said.
There are many reasons that developers may or may not choose to build in a particular location. Some are in the power of local and state governments, like zoning and building codes, permitting timelines and fees. But many are not, said Hanson.
“Whether a project moves forward depends on interest rates, construction and land costs, access to capital, insurance and expected rents or sale prices,” she said.
Affordable housing construction faces an additional hurdle: a lack of public money. With very few exceptions, building homes that are affordable to those making below average incomes in California requires public subsidies, philanthropic capital or other lenders and investors willing to take a loss. Taxpayer support provided by the state has been in short supply after a voter-approved bond from 2018 that provided funding for California’s signature affordable development subsidy ran dry. That explains why the affordable production numbers are so much lower.
Affordable developers and other housing advocates are hoping voters will back an $11.25 billion state bond in November to replenish the coffers.
Meanwhile, “moderate” income housing is especially tough to build, facing the financial worst of both worlds. It often doesn’t qualify for affordable subsidy programs that prioritize projects serving people further down the income ladder. But rents affordable to those earning median incomes are often too low for unsubsidized developers hoping to turn a profit.
An escape valve
The state may force local governments to lay the groundwork for new development — identifying potential sites, rezoning to allow for denser housing, changing local laws that make construction more economically feasible. But historically, local governments haven’t faced any consequences if nothing actually gets built.
That changed in 2017, when state lawmakers passed a landmark housing bill aimed at boosting new housing production where it was most needed. In jurisdictions that are halfway through their planning process but have yet to permit at least half their housing targets for above-moderate, low- and very low-income housing (housing affordable to a "moderate" income level isn't included), the law requires local governments to fast track most apartment and condo projects. In exchange, developers have to set aside a certain number of affordable units and pay their workers more.
Of the 212 Southern California cities and counties that crossed the halfway point this year, all but four failed to hit those numbers and are now subject to the streamlining law.
But if history is any guide, that alone isn’t likely to trigger a building boom.
Private developers have insisted that the affordability requirements and higher wage standards written into the law make projects infeasible everywhere but in the highest rent neighborhoods. Since 2018, the law has been used to green light 27,961 units, according to the state’s housing department. That’s a significant sum, but it's far from enough to close the gap.
This article was originally published on CalMatters and was republished under the Creative Commons Attribution-NonCommercial-NoDerivatives license.
