When housing planners zig, builders zag.

That’s the story of California’s Regional Housing Needs Allocation (RHNA), the instrument the state uses to determine where and how much affordable housing is to be built. But the Golden State’s reputation for affordable housing is long tarnished, leaving prospective homebuyers and real estate agents alike wondering about its effectiveness.

A recent UCLA Lewis Center report warns that California’s current RHNA system is woefully ineffective. Housing is more likely to be built outside of the sites cities earmark for affordable housing development. And what’s being built isn’t even making a dent in California’s housing deficit.

Can the Golden State modernize RHNA to meet its purpose?

Enter the Housing Element Law

Since 1969, California’s Housing Element Law has required local governments to plan and generate housing to meet its residents’ growing needs using RHNA requirements handed down by the state. A city’s RHNA requirements are a crucial tool in what determines these housing plans.

Before California’s Department of Housing and Community Development (HCD) issues RHNA plans, they conduct a Regional Housing Needs Assessment. The assessment attempts to address both existing and future housing needs, taking into account projections for population, job growth, and transportation costs, among other factors. The result then dictates housing allocations at both the city and county level.

The allocations are where things get sticky, encountering a lot of not-in-my-backyard (NIMBY) sentiment, especially in suburban or single-family zoned areas. In turn, housing production has remained slow and housing quotas have only increased. The state has even gone so far as recently adding penalties for failure to meet quotas hoping to incentivize development.

Troubleshooting the RHNA

Researchers from UCLA’s Lewis Center for Regional Policy Studies have scrutinized the RHNA mechanism. They find a fundamental flaw in that the right hand, cities, is not talking to the left hand, developers.

Cities estimate where developers can and will want to build based on local resources, projected populations, transportation needs and job growth. Nonetheless, their designations bear little resemblance to the resulting development. Developers instead end up building on sites marked for or previously used for other purposes.

This is not meant to assign blame solely to cities. Cities identify specific sites that best meet housing quotas, but housing development can be hard to anticipate. Planners tend to be more conservative in their zoning density estimates of a site, considering constraints like parking requirements, municipal rules and other setbacks toward development.

Furthermore, the study suggests California holds an abundance of buildable vacant land. The issue is not a matter of capacity, but rather correct designation and coordination with developers.

A more accurate RHNA

For agents, this breakdown in communication manifests as low inventory and high prices. A more accurate RHNA may significantly change the real estate market landscape for the better.

The Lewis Center offers a two-part resolution to this issue.

First, California needs to adjust the model by which its cities select sites for housing for likelihood of development. This includes identifying all potential sites for housing, rather than limiting themselves to traditional inventory sites. This would subsequently widen the net of sites available.

Regional councils of government need to develop and maintain geocoded databases of every parcel in their region with basic information regarding each parcel’s existing uses and zoning. Analysts could then develop regional models of site development, allowing the councils to better estimate development probability and apply them to their housing element updates.

Second, cities need a preemptive housing credit for housing expected to be built on sites not listed in their plan, incentivizing them to accommodate development. By coupling this credit with production of non-inventory sites from the previous housing cycle, cities are more likely to accommodate development when it’s proposed. Ideally, this would also allow for mid-cycle adjustments if the credited development fails to materialize.

These solutions points California toward more accurate housing plans in accordance with on-the-ground conditions — rather than what appears ideal on paper.

Developers have learned to game the state’s current housing planning mechanism, leaving out buyers, sellers and subsequently real estate agents. With such a distorted rule of thumb for housing planning, it’s no wonder agents are hurting for listings. Supporting small but targeted housing solutions like modernizing RHNA is a winning strategy for brokerages in the long run.