Having checked gas taxes and cap-and-trade off their 2017 agenda, California political leaders will turn to the state’s housing crisis after a month-long midsummer vacation.
It’s high time, because California is building barely enough new housing to handle current population growth and making no dent in a years-long backlog.
Between 2003 and 2014, California built just 47 percent of what it needed, according to state housing officials, with construction dipping at one point during the Great Recession to a sixth of pre-recession levels. Although the economy has fully recovered, homebuilding has increased to just half of its pre-recession high.
The shortage has sent home prices and rents soaring, particularly in coastal urban areas, thus forcing many working families to spend half or more of their incomes for shelter – if they can find it. The crisis not only exacts a human toll but is an existential threat to the state’s economy.
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Housing authorities bluntly say that the core issue isn’t a lack of potential housing development investment but rather the reluctance of local governments to approve new projects, particularly high-density complexes for low- and moderate-income renters, because of “not in my backyard” resistance among homeowners and voters.
When the Legislature reconvenes in August, it will face dozens of bills that purport to relieve the housing crisis, but four major approaches:
▪ Senate Bill 2, which would impose a $75 per document fee on real estate transactions, with a $225 ceiling, and raise about $250 million a year for low- and moderate-income housing;
▪ Senate Bill 3, which would place a $3 billion housing bond issue on the 2018 ballot;
▪ Senate Bill 35, or some variation, which would force cities to meet their state-imposed housing quotas by diluting, or eliminating, local land use powers; and
▪ Perhaps a bigger chunk of the money that the state hopes to generate via its quarterly auctions of carbon emission allowances under the newly reauthorized cap-and-trade program.
The document tax, which would require two-thirds legislative votes, is politically tricky, but Democrats have enough members to do it on their own and some Republicans provided key votes to achieve two-thirds majorities on gas taxes and cap-and-trade.
Doing something to break the local project logjams – Gov. Jerry Brown has floated his own version for a couple of years without success – is by far the most important element, and the most politically difficult because it would impinge on local governments’ much-cherished power over land use and development.
Simple arithmetic reveals why permit streamlining is critical. The state says we need 180,000 new units of housing a year, but we’re building only 100,000 now. Closing that 80,000-unit gap would require more than $26 billion a year in additional investment at the average cost of $332,000 per unit for lower-end housing cited in Brown’s budget.
Under even the best circumstances, therefore, the state could provide only a tiny fraction of the needed money, so making it easier for private and nonprofit money to flow into actual construction is the most vital element of any package.
The major pitfall is that faced with the difficult politics, Brown and legislators will settle for a token response – throwing a few billion dollars at the problem that won’t make even a small dent and failing to enact the regulatory reforms.
That not only would ignore the most vital issue, but would allow politicians to claim a face-saving, undeserved victory, much as they did for a roadway improvement package that covers only a fraction of the unmet need.