Housing Reform Is California's Most Pressing Challenge

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In his May Revise of the state's budget, California Governor Jerry Brown included an interesting trailer bill policy item - streamlining the housing development approval process for projects that included a certain percentage of low-income units. Despite the state grappling with a growing housing affordability crisis, the policy proposal immediately drew a cold reception from legislators, "not-in-my-backyard" (NIMBY) groups, unions, and environmentalists. However, while not perfect, Brown's "as-of-right" reform is an important first step to correcting the state's most pressing policy challenge.

Why the most pressing? Statewide, California's median home value per square foot is 2.3 times that of the rest of the nation. Its housing supply just hasn't kept up with housing demand. The affordability crisis is even more acute in the Silicon Valley-Bay Area. The San Francisco and San Jose metro area's median home value per square foot is 4.4 and 5.2 times, respectively, the nation's median. And renting - historically the "affordable" option - isn't any better of an alternative. California's median multi-family rent list price is 1.2 times the nation's level, (1.8 and 1.6 times in San Francisco and San Jose). But this is so pressing because for the first time in modern Californian history, the state's is economically dependent on the Silicon Valley-Bay Area. And according to employers and employees in the region, housing affordability is their number one challenge and concern.

What needs to be done? The only long-term, structural solution to California's housing crisis is to promote housing development. Any other solutions - like rent control and housing subsidies - are short-term fixes that do nothing to address the underlying cause. In fact, some of them, such as rent control, likely make the situation worse by encouraging further supply restraints and quality reductions. But standing in the way of housing development is rampant (and powerful) political forces, manifested mostly in the residentialist-NIMBY movement. By co-opting the local political system, these neighborhood movements prevent, slow down, and/or make prohibitively expensive housing development.

Enter Governor Brown's "as-of-right" reform. "As-of-right" develop is the norm in many states. It essentially means that as long as the development plan adheres to the land use prescriptions in place, then only administrative review is necessary to acquire the building permits. The norm in California, however, is that all development plans, no matter the size or scope, must be reviewed by local planning commissions and elected city councils, in addition to administrative review. Naturally, this lengthens the review process, ensures political meddling of development, and enables opposition multiple points of entry. Governor Brown's plan would impose "as-of-right" on localities via state law for projects meeting certain parameters. Brown's plan, however, isn't perfect, as the Legislative Analyst's Office points out. It's low-income unit percentage threshold is likely too high - which would reduce the number of developments, negating the point of the proposal in the first place - and it doesn't prevent localities from just changing land use rules to make compliance onerous.

It is clear why unions, environmentalists, and NIMBYs are all opposed to the reform. It eliminates a crucial tool they use to promote their self-interests (even if those clash if the interests of the community). But some legislators are hesitant about it too, particularly legislative Republicans, who could use the housing affordability problem as a way to appeal to millennials and minorities. For them, opposition boils down to local control.

Local control always isn't the best. Most Republicans consider local control the holy grail of policy-making. And yes, there is significant value to local control. But local control for the sake of local control ignores efficacy of policy-making. Policymaking should occur at the level of government where the solution to the underlying policy problem is most effectively and most efficiently implemented. For instance, local control of national security doesn't make much sense. Local governments, for the most part, have proven themselves incapable of effectively and efficiently handling housing policy in California, mostly because local governments are too easily captured by anti-development forces.

Apparently, it looks like the "as-of-right" reform won't be included as a budget trailer - for the best, since budgets shouldn't be used to push policy bills. But this reform should move forward because it can be an important tool to correct the massive supply-demand imbalance. Otherwise, limited action will occur and everyone will suffer.


Carson Bruno is the assistant dean for admission and program relations at the Pepperdine School of Public Policy. Follow him on Twitter @CarsonJFBruno.

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