California lawmakers have spent the first part of the year taking stock of the money and laws approved in recent years to address the state’s lack of affordable housing.
A litany of problems plaguing the state — from homelessness to the high cost of purchasing a home — can be traced back to one thing: an extreme shortage of affordable housing. Estimates say that shortage is anywhere from 1 million to 3.5 million units.
A joint hearing of state lawmakers from the Senate and Assembly looked at what’s working and where the state continues to fall short on housing affordability.
“We’ve done an enormous amount of work in the last seven years,” Sen. Scott Wiener (D—San Francisco) said after the hearing. “We’ve passed some very impactful bills that are making a difference, but it’s not fast enough and there’s still work to be done.”
Here are three key takeaways from the oversight hearing earlier this week.
1. What’s working? Laws to streamline housing & ADUs
More than 100 new laws to address the state’s housing shortage have been signed in recent years by Gov. Gavin Newsom and his predecessor Jerry Brown. Among these, housing officials say two areas stick out as bright spots.
First, recent laws to make it easier and less expensive for homeowners to build accessory dwelling units (ADUs) — also sometimes called “granny flats” or “backyard cottages” — have paid off in a big way.
In five years, new ADU permits grew tenfold — from 2,100 permits in 2016 to 21,000 in 2021 — thanks to the added flexibility and fee waivers, said Ben Metcalf, managing director at UC Berkeley’s Terner Center for Housing Innovation.
The backyard units also represent about one-fifth of all new building permits issued in the state.
“There’s a really helpful story, maybe a playbook that we can think about following” in other areas of housing policy, he said.
Lawmakers also pointed out an increase in new affordable housing attributed to a controversial measure Wiener authored in 2017, which sped up new housing construction in cities that did not meet their housing goals.
The law has fast-tracked construction of nearly 18,000 new units, three-quarters of which are low-income housing.
“Senate Bill 35 has really not delivered on its intent in terms of unlocking new market supply, but it really has become the primary vehicle for choice for folks building subsidized affordable housing,” Metcalf said.
The law is frequently used alongside density bonus laws, which incentivize developers to add more units to projects, Metcalf’s research shows.
Wiener is running legislation to expand the law and extend it past its scheduled sunset at the end of 2025.
2. That progress still isn’t even close to meeting demand.
California needs at least 2.5 million new housing units, including 1 million for low-income residents, over the next eight years, according to the state’s housing plan.
That equates to about 300,000 new building permits every year — a gap too large to be filled by new ADUs alone.
It’s also a high bar that hasn’t been reached since before the Great Recession. In 2020 just over 100,000 new building permits were issued in California.
Source: California Statewide Housing Plan
The goal for 2.5 million new homes is more aggressive than previous cycles of California’s housing plan: It’s more than double the number of new homes planned for the previous eight year period.
The higher aspirations are partly due to the state increasing its expectations of local governments to plan and follow through on building more housing, a process known as RHNA, or the Regional Housing Needs Allocation.
Megan Kirkeby, Deputy Director for the California Department of Housing and Community Development told lawmakers that efforts in recent years to add teeth to RHNA laws have transformed the process.
“It’s no longer a paper exercise. It’s a contract with the state,” she said. “The bar is higher, but every single [plan] that is compliant will have a much better chance of actually producing housing than we’ve ever seen before.”
Still, market forces are showing troubling signs for housing construction.
Experts worry a hike in federal interest rates, which is meant to slow inflation, will also continue to slow the pace of new homebuilding in the coming months. Metcalf also described the costs of housing construction as an “existential issue” in the quest for more housing.
3. Leaders tease the next big battle: CEQA reform
California’s housing crunch has become so urgent that even climate-friendly Democrats are eyeing changes to the state’s environmental law, which is often used by cities and homeowners who do not want new housing built in their neighborhoods — also known as NIMBYs or “not in my backyard” — as a tool to prevent or delay new housing.
The 53-year old California Environmental Quality Act, or CEQA, requires the study and consideration of the impacts a project will have on the environment. But Wiener and others point to an ongoing lawsuit over planned student housing at UC Berkeley as evidence that the law has become more of a hindrance than anything else.
In a brief interview Wednesday, Wiener said he “will be introducing a bill in the next week or two” to reform the law, though he provided few details. He said while the proposed changes would address “some of the issues that came up in the UC Berkeley case,” they will apply broadly.
The San Francisco Democrat said the proposal will be “pro-housing, pro-climate action” and have a “strong coalition behind it.”
Wiener’s bill may get support from the governor, whose complaints about CEQA date back to his time as San Francisco Mayor, when a lawsuit citing the environmental law delayed miles of new bike lanes.
“California cannot afford to be held hostage by NIMBYs who weaponize CEQA to block student and affordable housing,” Newsom wrote following the ruling against the proposed UC Berkeley housing project. “The law needs to change.”
Other items on lawmakers’ to-do lists include Wiener’s bill to extend SB 35 permanently and finding more stable, ongoing funding for affordable housing, which Assembly Housing and Community Development Chair Buffy Wicks (D—Oakland) said she is “committed to figuring out in the next couple years.”
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