Each year, Southern California adds the equivalent of a new Pasadena, a new Fullerton, a new Victorville or a new city of Orange to its population.
Yet housing experts say the pace of house and apartment construction isn’t keeping up with that growth, generating some of the highest rents and home prices in the nation.
The solution is to build more homes, homebuilders long have preached. And to do that, the sermon goes, California needs to prune its thicket of regulations to make it easier to build.
Now several others are joining the choir, including affordable housing advocates, a San Francisco think tank, legislative analysts, economists and, most recently, Gov. Jerry Brown.
In May, Brown unveiled a plan to fast-track construction of apartments and condos if the developments include affordable housing – or homes for lower-income families with restricted rents or prices.
A database of housing affordability statistics created by The Associated Press shows Southern California’s two main metropolitan regions – Los Angeles/Orange counties and the Inland region – consistently rank among the U.S. markets that most stretch household budgets.
Among the 40 largest U.S. metro areas, L.A.-O.C. had the highest percentage of price-stressed owner households, according to census figures from 2014, the latest year available. The Inland region had the fourth-highest percentage.
The Inland region also ranked second for rent-stressed households, and L.A.-O.C. ranked third. L.A.-O.C. also had the highest percentage of middle-age residents renting instead of owning their home.
“We’re just not getting enough supply to the marketplace,” said Ben Metcalf, Brown’s appointee to head the state Housing and Community Development Department. “What the governor basically said is it’s bad enough the state needs to take affirmative action.”
Not everyone is on board with the governor’s plan, however.
Cities, environmentalists and neighborhood activists complain that under the governor’s plan, residents no longer have a voice in how some developments affect traffic, property values and their quality of life.
“It sidesteps environmental review,” said Dan Carrigg, legislative affairs deputy director for the League of California Cities. “If an adjoining property owner has an issue, there’s no forum.”
The pace of homebuilding in Los Angeles, Orange, Riverside and San Bernardino counties is woefully below the projected need, two sets of data show.
The Southern California Association of Governments projected the region will add 433,000 households from 2014 through 2021, or almost 62,000 households a year.
In addition, the nonpartisan state Legislative Analyst’s Office said in a 2015 report the region needs to build roughly 100,000 units annually to keep housing costs in line with national price gains.
But the region averaged fewer than 48,000 units a year from 2000 through 2015, according to building permit data from the California Homebuilding Foundation.
As a result, low-income households are spending more of their earnings on housing, homeownership rates are lower, Californians are four times more likely to live in crowded conditions and commutes are 10 percent longer, the Legislative Analyst’s report said.
CEQA and Proposition 13
The lack of housing supply can be narrowed to two main culprits, said Chris Thornberg, a former UCLA professor and founder of Beacon Economics: the California Environmental Quality Act and Proposition 13, the voter-backed measure that limits property tax hikes to 2 percent.
Earlier this year, Beacon Economics teamed up with Next 10, a San Francisco think tank, producing a series of reports examining the impact of high housing costs on the state.
One of the key conclusions: The solution to the housing shortage is “streamlining the permitting processes and finding a way to reduce concerns about environmental protection policies.”
CEQA, which requires environmental impact reports for some projects, is “used and abused by interest groups of all shapes and sizes” to stop or delay developments, Thornberg said. And “it’s certainly not restricted to environmental groups.”
“Frivolous litigation is the real main problem,” added Gordon Nichols, government affairs director for the Inland region’s Baldy View Chapter of the Building Industry Association. “If you can sue anyone at any time for anything, even though your project does comply with CEQA, you’re opening up a can of worms.”
Kathryn Phillips, director of Sierra Club California, disagreed.
“The people who have wanted to get rid of CEQA have wanted to get rid of it forever. ... They are using this housing crisis now as a way to pummel CEQA,” Phillips said. “I’m confident that CEQA is not the reason we have problems with housing.”
The Next 10 report also found that Prop. 13 biases local government against residential development.
Local governments tend to favor commercial development because it generates more revenue through sales and hotel taxes with relatively little demand for municipal services, the report says.
Housing generates less revenue because Prop. 13 restricts property taxes while new homes boost demand for roads and police and fire protection.
“Cities don’t want housing, particularly workforce housing,” Thornberg said.
Thornberg’s position on Prop.13?
“Toss it. Toss it. Gone,” he said.
And voters will support Prop. 13’s repeal, he said, if you explain that it’s shifting revenue away from income and corporate taxes.
“That’s obviously utter nonsense,” said Jon Coupal, president of the Howard Jarvis Taxpayers Association, a major Prop.13 proponent. “Prop. 13 has never been a cause of the housing crisis. The argument presupposes there’s a lack of revenue, and California cities have lots of revenue.”
‘By right’ development
Experts say the most acute housing need is for low-income households.
The nonprofit California Housing Partnership Corp. estimated that Los Angeles, Orange County and the Inland region have a shortage of nearly 781,000 affordable housing units.
But a state Legislative Analyst’s report issued in February found that it would cost in the low tens of billions of dollars to fund affordable housing needs entirely with increased public assistance, a solution that “likely would be impractical.”
The solution, the report said, was to encourage additional private housing construction.
“Considerable evidence suggests that construction of market-rate housing reduces housing costs for low-income households,” the report said.
Gov. Brown seeks to spur homebuilding by giving developers “by right” approval to build if they comply with existing land use guidelines and zoning and have 20 percent of the units set aside as affordable housing.
If the development is within half a mile of a “major” transit stop, 10 percent of its units must be set aside as affordable housing.
Brown’s measure, which is pending before the Legislature, set off a firestorm of protest among cities and anti-development forces.
“We all agree there’s a housing shortage,” said Tony Cardenas, regional manager for the Orange County chapter of the League of California Cities. “But the way the governor is going about it is stripping away local control and eliminating public transparency. That’s problematic.”
Carrigg, the league’s deputy legislative director, said that Brown’s plan assumes that all cities have updated their general plans.
“Conceptually, the argument is, hey, your plans are in place – let’s move it forward,” Carrigg said. “In reality, the plans aren’t as updated as they should be.”
On the ballot
An initiative on the November ballot in Los Angeles called Build Better LA would require developers to provide affordable housing or pay a fee to support affordable housing in exchange for approving zoning or general plan changes.
Initiative backer Alan Greenlee, executive director of the Southern California Association of Non-Profit Housing, said cities should get concessions in exchange for increasing a project’s density or size.
“If we’re giving more value for land, we should not eliminate (affordable) housing. We should replace those units,” Greenlee said.
Economists, affordable housing advocates and even some environmentalists say also that more high-density housing is needed in existing urban areas – preferably near public transit or within walking distance to jobs, shopping and entertainment.
But construction of apartments and affordable housing consistently has been opposed by local residents fearing increased traffic and crime and decreased property values.
Developers and some economists call them NIMBYs (not in my backyard), but the residents say they’re fighting to protect their quality of life.
More than two-thirds of coastal California metros have policies aimed at limiting growth, the Legislative Analyst’s Office reported. At least four Southern California cities – Costa Mesa, Los Angeles, Santa Monica and Redondo Beach – now have slow-growth ballot initiatives in the works.
“People who have lived in their neighborhoods a number of years don’t want to see change,” said F. Noel Perry, the founder of Next 10, the San Francisco think tank.
But ultimately, the issue isn’t whether there’s going to be change, Perry and Greenlee argue. The issue is how local governments deal with it.
“I think people who advocate for keeping the world the same are terribly misguided. The world is not the same,” Greenlee said. “We can either ignore (change) or we can get ahead of it.”
(Staff writers Neil Nisperos, Kelcie Pegher and Megan Barnes contributed to this report.)
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