May262016

Governor Brown’s housing affordability proposal could actually succeed

By removing the ability of local jurisdictions to deny approvals for conforming developments, nimbys will no longer prevent much-needed new construction.

nimby-partyIn most parts of the world, anyone who owns an improved lot may build on it. As long as the plans conform to the local building codes and architectural guidelines, nobody can stop the owner from building on their own lot. No government body exercises discretionary approval power over the owners right to build. This is known as “As-of-Right” permission. Essentially, the phrase establishes a legal entitlement that arises when the plans conform to all legal codes.

Land development in many parts of the country is subject to as-of-right zoning. In these jurisdictions, a governing body must approve any project that conforms to the underlying regulatory standards. Many people are not aware of the fact that California is different. In California, a project can conform in every way to every zoning regulation and building code and still get rejected by a local governing body.

This discretionary decision-making capacity empowers nimbys, and since everyone in California wants to be the last new resident in their neighborhood, local governments exercise (abuse) their discretionary decision-making power, refuse permission to build more housing units, and exacerbate the problem of too little housing supply in California.

Affordable housing in California requires ignoring the NIMBYs. The problems with chronic shortages, inflated house prices, and the substitution effect to lower quality housing is a direct result of the development approval process in California being 100% in the hands of local politicians. The problem with politicians acquiescing to nimbys is so bad that a judge had to order the city of Huntington Beach to override the local Nimbys and provide more affordable housing.

Further, since local governments are highly dependent upon commercial and business tax revenue, they zone for more commercial than residential land uses, which in turn creates imbalances between the number of jobs and the number of available housing units.

nimby

To my surprise, Governor Brown proposes a broad reform that may actually solve the problem.

Jerry Brown Wants “As-of-Right” Housing

May 23, 2016

Last week, Governor Jerry Brown announced introduction of potentially landmark legislation that would allow for “as-of-right” housing in California. This means that developments meeting certain conditions would not be subject to discretionary review by local decision-making bodies, or endless appeals by disgruntled local neighbors. …

This is a huge step forward. The only way California will ever have housing that’s affordable in a free-market, non-subsidized way is to shift power away from local governing bodies. Governor Browns proposal is the simplest and most effective way to neuter the nimbys because they will no longer effectively lobby local government officials to stop development that benefits everyone.

nimby-hypocrisy

I long ago resigned myself to the idea that California will always endure housing that’s so expensive that our children won’t be able to live here. If this law passes the golden age of gentrification may be behind us.

Here’s what we know so far:

What It Does
According to the Legislative Analyst’s Office (LAO), the measure would make housing that meets the following conditions “as-of-right”:

  • Conforms with existing general plan and zoning rules
  • Multifamily housing of greater than two units
  • Qualify as infill housing
  • Meets certain affordability requirements (20 percent on-site below-market-rate housing or 10 percent on-site if located within half-a-mile of a transit stop)
  • Not applicable to certain locations such as farmlands, wetlands, hazardous waste sites, etc.

The legislation gives local jurisdictions clear and strict timelines for opposing an as-of-right development, expedites design review, requires relocation assistance for displaced households and, yes, eliminates CEQA review.

deforestationIt’s not entirely accurate to portray this as completely bypassing CEQA review. The project must still conform to the underlying general plan and zoning rules, and those were reviewed in a CEQA process. This proposal merely eliminates the need for subsequent a CEQA review of the specific project that fits under the umbrella of the prior approval under CEQA.

CEQA is partially responsible for the problem, but the law is widely misunderstood. CEQA merely mandates study and disclosure. An environmental impact report — the product required by CEQA — is a thorough examination of the physical and cultural impacts of a proposed development. It takes a long time to do a thorough study, and it costs a lot of money, which is why developers whine about it, but the findings in the document do not approve or disapprove a project. That is at the discretion of local government officials, and this discretionary approval is at the heart of the problem.

The environmental impact report may find significant impacts that cannot be mitigated, and the local government may approve it anyway. Under Brown’s proposal, local governments could still undergo a CEQA review and approve a discretionary project that does not conform to general plan and zoning rules — and deal with the inevitable lawsuits. However, under Governor Brown’s proposal the local jurisdiction will not be able to deny a conforming project — and local jurisdictions do this far too often.just_say_no

San Francisco Case Studies
This proposal would no doubt have major impacts in San Francisco, where, over many years, a long list of code-compliant projects have been appealed for what we believe are unjustified reasons. For example:

  • Local neighbors appealed 50 permanently affordable low-income homes, half for transition age foster youth, at the Booker T. Washington Center because it was “too tall.” This delayed the project for several years and added about $10 million to the project’s budget.
  • The car-free, 12-unit development at 1050 Valencia, located a few blocks from a BART station, was repeatedly appealed then sued in court because because of its height and objections to its impact on “neighborhood character.”
  • Local residents appealed 88 Arkansas, which included 20 percent on-site affordable housing, because of objections to how the bedrooms were designed.
  • Most recently, 1066 Market Street was appealed because the project’s low-income units were deemed too expensive for the Tenderloin’s existing residents.

It has become increasingly evident that San Francisco does not have the tools to address the affordability crisis on its own. The State of California needs to step in and Governor Brown’s proposal would be a major step forward towards creating certainty that market-rate and affordable housing projects actually get built in a timely way.

California house prices are high relative to the rest of the nation for two reasons, one fundamental, and one not. First, California wages are higher than most of the rest of the nation, so people who live in California qualify for larger loans and use those loans to bid up prices — the fundamental reason. Second, California has a chronic shortage of housing, which forces buyers to compete with each other for the available housing stock — a reason that is not fundamental, but political.PREFAB-ABANDONED

The market for housing in most of the United States is much more stable, and house prices are much less inflated because the local political system does not restrict new home development near as much as it does in California. As soon as house prices rise above the cost of construction in the rest of the country, builders respond by building more houses and selling them for a profit. In California builders are not allowed to do that, so shortages persist, prices get inflated, and everyone suffers a diminished quality of life because they must substitute down to a lesser quality home.

Since he abolished Redevelopment Agencies in 2011, Brown has shown little interest in creating new sources of funding to subsidize affordable housing. The fiscally conservative Governor wants to keep the state budget balanced, especially as he anticipates another economic recession, and doesn’t believe additional funding can stretch far enough to make a significant impact. He’s quoted in the LA Times:

“Hopefully, the supply is going to bring down the cost,” Brown said. “Otherwise, through subsidies and through restrictions, we’re just spending more and more tax dollars and getting very, very little.”

I agree with Governor Brown on the ineffectiveness of housing subsidies. Further, subsidies unjustly displace those who don’t qualify, so in addition to being costly, they cause social injustice.

The LAO’s report, California’s High Housing Costs: Causes and Consequences, clearly explains that decades of underproduction are the chief culprit of the affordability and displacement crises. Removing barriers to building housing is a key solution to address this problem. Governor Brown’s proposal could be a game-changer that makes it significantly easier to build more housing of all levels of affordability.

If implemented this proposal would solve the problem of housing affordability over the long term. Builders and developers won’t build so much so fast as to lower prices, but they can and will build enough to lower the rate of growth in rent and cost of ownership below the rate of wage growth, reversing the trend of the last 40 years. If wages grow faster than rents or resale prices for long enough, all three can rise, and affordability will still improve.

It took us 40 years to create the affordability problem, and it make take 40 more to solve it. But even the longest journey begins with a single step, and this is a proper step in the right direction.

Mt-Everest-development

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