California doesn’t have the best track record for meetings its residents’ housing needs.

In fact, the current housing crisis has meant the demands of millions of residents have been unmet by construction of new housing this past decade. The result has been unhealthy vacancy rates, erratically high rents and home prices, and rapidly increasing rates of homelessness in our major metros.

The state government has attempted to address this need with legislation to encourage more building of low- and mid-tier homes. This includes re-analyzing how different regions of the state evaluate their own housing needs as they grow. However, local governments and vocal not-in-my-backyard (NIMBY) advocates have managed to find ways around legislation to keep the status quo.

Recently, California legislators have caught on to the deceptive practices used to keep standards of housing need below what is actually required to support adequate housing for all residents. Previously, some regions analyzed their housing needs that resulted in an under-production of housing, using this to calculate future housing need. This meant that the old standards that weren’t working were used as the base for calculating future need.

Under the new amendment, each region needs to calculate housing need using the number of low-wage jobs present alongside the number of housing units currently available to low-income workers. [Calif. Government Code §65584(d)(3)]

Additionally, each region needs to aim for a healthy rental vacancy rate of no less than 5%. [Gov C §65584(b)(1)(E))]

Local governments also need to consider cost burden when making their plans to address housing need. For example, the typical rental households across California’s major metros spends 40%-50% of their income each month on rent. To maintain a healthy balance sheet, the average cost burden ought to be around 30%. Pulling this average down to 30% needs to be part of each region’s housing plan for the future. [Gov C §65584(b)(1)(H)]

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The plan for more housing is ambitious

The California Department of Housing and Community Development (DHCD) recently approved its regional housing goals for the coming decade. Local governments whose regional housing plans are out of compliance are not eligible for DHCD funding.

For example, Alameda County, encompassing the Bay Area, has been set a goal of 441,000 more housing units to be built between 2022 and 2030. However, to meet its current goals it needs to complete another 188,000 before 2022. This doubles the goal for some cities, like Berkeley, when they are already falling far behind current goals.

The Bay Area’s new housing goal is distributed among tier groups with:

  • 43% allocated to higher than moderate-income households;
  • 16% allocated to moderate-income households;
  • 15% allocated to low-income households; and
  • 26% allocated to very-low-income households.

The distribution of income group allocations is similar in other major metro areas, including San Diego and Los Angeles.

While housing advocates claim the goals are short of what is needed to meet the area’s growing population, local officials are unsure how they’re going to build enough new units to meet even these minimum goals. The end result may be that density creeps out from downtown areas into the suburbs.

Increased suburban density is, of course, a NIMBY’s worst nightmare. However, when local jurisdictions loosen their zoning laws, development has a chance to organically take hold. Then, vacancy rates will stabilize and incomes will be able to rise in line with rents and home prices.

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The case for looser zoning regulations