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Assistant Dean Carson Bruno on California's Unaffordable Housing | Real Clear Markets

Expensive Housing Imperils the California Dream

 February 16, 2017 | By Carson Bruno | Real Clear Markets

The unaffordability problem affecting the Bay Area-Silicon Valley region of California is a serious statewide crisis that Sacramento isn’t taking seriously.  But this problem isn’t the Bay Area’s alone.  California’s most populous region – Greater Los Angeles – is also plagued with unaffordable homes and rentals. And March 2017’s consolidated Los Angeles election has housing affordability front and center.

Los Angeles County – Delinquent on RHNA: The Regional Housing Need Assessment (RHNA) is part of the State Housing Law requiring forecasts (over an 8 year time period) of the housing need for all jurisdictions (both incorporated and unincorporated). For Los Angeles, this responsibility falls on the Southern California Association of Governments (SCAG).  Communities within the region are then responsible for ensuring that the housing need is met over the 8 year time period.  The problem: while state law mandates the release of these forecasts, the law doesn’t mandate jurisdictions to actually add the housing need.  In the 2006 to 2014 RHNA period, the County of Los Angeles added 115,775 housing units – just 41 percent of the county-wide RHNA.  The fact that jurisdictions routinely fail to meet the RHNA forecasts is further exacerbated by the fact that these forecasts are notoriously conservative, meaning that the communities should be going above-and-beyond their RHNA. 

Measure S – A Case Study in Bad Policy: On March 7, Los Angelenos go to the ballot for the March 2017 consolidated election.  On the city’s ballot is Measure S, benignly named the Neighborhood Integrity Initiative. Measure S, if passed, would impose a development moratorium for up to two years and dramatically change how the City procedurally deals with development projects.  In essence, Measure S would make it functionally impossible for the City of Los Angeles to approve new development.  The Yes on Measure S’s tagline – “Save our Neighborhoods” – is pulled straight from the NIMBY-Residentialist movement’s handbook, whose aim is to preserve the intrinsic culture or feel of a community at a specific point in time.  Never mind the fact that all communities are dynamic and ever-changing.

There are a lot of excellent arguments against Measure S, but perhaps the most pressing is that its proponents either fundamentally misunderstand LA’s affordability problem or (worse) are choosing to ignore it. Los Angeles is growing more unaffordable because supply has not kept pace with demand.  It’s that simple. Yes, part of the problem is structural – development projects take a long time to start and finish.  But the more detrimental part is political – rampant NIMBYism and Residentialism up and down California’s coast further elongates an already long process. Between 2006 and 2014, the City of Los Angeles’ RHNA was just under 113,000 in new housing. What did Los Angeles actually add? Just over 67,000 units. Banning new development won’t fix the problem; it’ll take a serious problem and turn it into an immediate crisis.

Steps in the Right Direction – Brown’s By-Right and SB 35: The news isn’t all bad, though. While most localities have abdicated their duty on ensuring local land use balances the needs of both existing and future homeowners and renters, some in Sacramento are looking for ways to address the problem. Governor Brown has made an effort to push for by-right housing laws, which would significantly streamline the permitting process for some development projects.  Will this be enough to significantly fix the problem? No. But it is a step in the right direction. The problem is, though, that even though Governor Brown has pushed for this, he’s found no one courageous enough in the Legislature to take the lead on by-right reform.  Until Sacramento Democrats realize the detrimental impact environmentalists and unions are having in opposing by-right reform and until Sacramento Republicans realize “local control” isn’t always the most appropriate for every policy, Brown’s efforts will go nowhere.  Then there’s newly-elected State Senator Scott Weiner’s SB 35. Weiner, who represents San Francisco, wants to add some teeth to the RHNA to incentivize localities to actually add the housing the RHNA says it needs.  This is good. But while adding teeth is good, SB 35 also adds a prevailing wage requirement to the mix. This will increase the cost of new development – which is already expensive – adding another barrier to an already barrier-bountiful industry.  One step forward. One step back.

The Los Angeles metro region’s unaffordability is unsustainable. In 1996, the metro region’s home values were 69 percent higher than the United States’.  As of the end of 2016, it was 207 percent higher.  How did this happen?  While the United States overall saw just under a doubling in home values over the last two decades, the Los Angeles metro saw an almost 250 percent increase.  LA has been where dreams are made. Not so, if this trend continues.

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