California housing shortage

A tent city, a form of improvised housing, in Oakland, California

Since about 1970, California has been experiencing an extended and increasing housing shortage, such that by 2018, California ranked 49th among the states of the U.S. in terms of housing units per resident. This shortage has been estimated to be 3-4 million housing units (20-30% of California's housing stock, 14 million) as of 2017. As of 2018, experts said that California needs to double its current rate of housing production (85,000 units per year) to keep up with expected population growth and prevent prices from further increasing, and needs to quadruple the current rate of housing production over the next seven years in order for prices and rents to decline.

The imbalance between supply and demand resulted from strong economic growth creating hundreds of thousands of new jobs (which increases demand for housing) and the intentional, NIMBY-caused illegality of construction of enough new housing units to meet demand. From 2012 to 2017 statewide, for every five new residents, one new housing unit was constructed. In California's coastal urban areas, (where the majority of job growth has occurred since the Great Recession), the disparity is greater: in the Bay Area, seven times as many jobs were created as housing units. By 2017, this resulted in the median price of a California home being over 2.5 times the median U.S. price. As a result, less than a third of Californians can afford a median priced home (nationally, slightly more than half can), 6 percent more residents are in poverty than would be with average housing costs (20% vs. 14%), homelessness per capita is the third highest in the nation, the state's economy is suppressed by $150–400 billion annually (5-14%) (because of lost construction activity, and money that must be spent on housing cannot be spent on other consumer goods), and the long commutes caused by unaffordable housing in the urban centers where jobs are is hindering California's ability to meet its CO₂ emissions goals.

Several factors have together caused constraints on the construction of new housing: density restrictions (e.g. single-family zoning) and high land cost conspire to keep land and housing prices high; community involvement in the permitting process allows current residents who oppose new construction (often referred to as NIMBYs) to lobby their city council to deny new development; environmental laws are often abused by local residents and others to block or gain concessions from new development (making it more costly or too expensive to be profitable); greater local tax revenues from hotels, commercial, and retail development vs. residential incentivize cities to permit less residential; and construction costs are greater because of high impact fees, and often developments are only approved if union labor is used.

In 2016, the Obama Administration recommended that cities across the nation with high housing costs reform their land use regulations to enable opportunity for people at all income levels to access jobs being created in growing cities. Since then, the California legislature has passed several bills: some reduced the fees and bureaucracy involved in creating ADUs, while others have added fees to real-estate document recording to finance low-income housing; yet even the most optimistic projections find that relative to the scope of the problem, these will have minimal effect. In addition, proposed bills that would have legalized higher density development close to public transit failed in the legislature. In 2019, the Council of Economic Advisers estimated that deregulating the housing market would lead to rents falling by 55 percent in San Francisco, 40 percent in Los Angeles, and 40 percent in San Diego.

Background

Issi Romem, an economist at the Terner Center for Housing Innovation at the University of California, Berkeley said:

"...as long as abundant new housing was built to accommodate those drawn to California, housing price growth was limited and the state's allure was channeled into population growth: From 1940 to 1970 California's population grew 242 percent faster than the national pace, while the growth of its median home value was only 16 percent faster than the nation's."

Starting in 1970, three major forces caused housing prices to increase dramatically: land use restrictions limiting housing density (zoning many areas to single-family homes, or to at most two stories), increased concern for the environment (which led to environmental laws and designating land for preservation and not development), and community involvement in the development process (which allows current—but not future—residents a say in land use decisions.)

The result of these policies was that from 1970 to 2016, California's population growth (relative to the US average) slowed to a third of what it was during the previous three decades (70 percent faster than the national pace by 2016), while appreciation of median home prices (relative to the US average) more than quadrupled to 80 percent greater than the national rate.

By 2016, the median price of a home in California, at $409,300, was more than twice the median price of a home in the U.S. as a whole, more expensive than any state other than Hawaii. The shortage is statewide; from 2010 to 2017, the state added one new housing unit for every five new residents, and is pronounced in employment centers such as the Bay Area and Los Angeles. In 2023, housing affordability in California reached a 16-year low, with only about 16% of homebuyers able to purchase a median-priced single-family home, as per data from the California Association of Realtors. In San Mateo and Santa Clara counties, buyers would require a minimum income of $504,400 and $451,200, respectively, to purchase median-priced homes of $2.01 million and $1.8 million.

The housing situation affects individuals differently, depending upon their circumstances. A person who has long since paid off a home mortgage has much lower costs than a renter or someone buying a first home. As of 2020, about 20 percent of California homeowners owned their homes free and clear, and 80 percent were still paying a mortgage. As is typical, homeowners without a mortgage tend to have lower incomes (e.g., due to retirement) than homeowners with a mortgage. California homeowners without a mortgage tend to spend almost 9% of their income on housing costs, including property taxes, which is slightly lower than the national average for homeowners without a mortgage.

Causes

The imbalance between supply and demand resulted from strong economic growth creating hundreds of thousands of new jobs (which increases demand for housing) and the insufficient construction of new housing units to provide enough supply to meet the demand. Fewer housing units built in the urban and coastal areas relative to the demand created by economic growth in those areas resulted in higher prices for housing and spillover to the inland areas. For example, from 2012 to 2017, San Francisco Bay area cities added 400,000 new jobs, but only issued 60,000 permits for new housing units. (For California as a whole, from 2011 to 2016, the state added only one new housing unit for every five new residents.) This has driven home prices and rents to high levels, such that by 2017, the median price of a home across California was more than 2.5 times the median in the U.S. as a whole, and in California's coastal urban areas, (where the majority of job growth has occurred since the Great Recession), the shortages are greater.

Several factors have together caused constraints on the construction of new housing.

Zoning laws

More than 95% of all land in California zoned for residential use is zoned as exclusively single-family.

Community resistance (NIMBYism)

NIMBY ("Not In My Back Yard") resistance by existing residents to new development is a major contributor to the difficulty of developing new housing in the state. People who already live in an area often perceive any new development or change as driving increased negative traffic and population impacts. Using various means (political pressure, protests, and voting power), NIMBYs try to keep newcomers out by defeating development projects in the local government permitting process, or slowing them down to the point that they become uneconomical for the builders.

"Localism" (a seemingly egalitarian belief that incumbent residents have the moral authority to define what their community will look like) has been found to instead result in imbalances which favor white, affluent homeowners, and suggest that localism is more prevalent in planning practice than in the general population. On this issue, The New York Times opinion writer Farhad Manjoo stated: "What Republicans want to do with I.C.E. and border walls, wealthy progressive Democrats are doing with zoning and NIMBYism. Preserving "local character", maintaining "local control", keeping housing scarce and inaccessible — the goals of both sides are really the same: to keep people out."

In 2022, California governor Gavin Newsom declared that "NIMBYism is destroying the state" and promised to hold cities and counties accountable for stopping new housing development.

NIMBYism and the unhoused

Unhoused populations in California feel the impact of NIMBYism. California has one of the country's largest homeless populations, concentrated in urban centers. NIMBY attitudes extend to unhoused people, as residents oppose their presence in local areas and near neighborhoods. Localism has influenced how neighborhoods are shaped to exclude homeless people, resulting in anti-homeless infrastructure and laws.

The rise in homeless vagrancy laws, also considered NIMBY laws, criminalizes general unhoused behaviors rather than specific illegal activities. Examples like Berkeley's "3x3 Ordinance" of 2018 restrict homeless individuals to a 3' x 3' square on the street, with defiance leading to criminal punishment. There has been a severe uptick in vagrancy-related arrests, which encompass a wide range of activities. This involves panhandling, tents, and lying down in public spaces. Such laws disproportionately affect homeless people, perpetuating their displacement and poverty. Moreover, individuals experiencing homelessness and facing arrest are less likely to be accepted into housing programs, welfare programs, or receive necessary healthcare. This is because many of these programs require favorable legal records to receive aid. This cycle highlights how anti-homeless laws can increase the incidence of homelessness.

In one particular case, that of People's Park in Berkeley, support for homeless residents clashes with the push for housing development by the University of California, Berkeley. The park became the center of conflict between local anti-homeless lobbies and park advocates, exemplifying the persisting NIMBY sentiments at the local level. Laws and ordinances aimed at limiting the visibility of the unhoused at the local level contradict the prioritization of health and housing at the state level. California State is supportive of "Housing First" policies.

Environmental laws

Environmental laws—primarily the California Environmental Quality Act (CEQA)—can be a hurdle to housing development. CEQA requires the permitting agency, usually a local government, to review each new project in accordance with CEQA to provide a full disclosure of the project's impacts to the approval body (usually a planning commission or city council) and the public. Individual single-family homes are exempt, as well as some smaller multi-family projects, but most mid-size and larger projects must go through a Negative Declaration or EIR to provide the required level of disclosure of project impacts. The EIR process requires the developer to conduct studies and provide a report on a wide variety of impacts including traffic congestion, wildfire evacuation, fire safety, noise, air pollution, greenhouse gas emissions, water pollution, biological resources, cultural resources and infrastructure impacts and develop a plan to help mitigate any impacts if any exist. The CEQA process is intended to make the approval process transparent to the public and decision-makers and takes place prior to a local government acting to permit a new development. Additionally, CEQA allows for legal challenges against the CEQA review process itself which may result in lawsuits by those who oppose the project and find the developer did not properly study the impacts from a project prior to the local government approving the project. Litigation is the main enforcement mechanism by which CEQA violations are mitigated. A report by the California Legislative Analyst's Office found that in the state's 10 largest cities, CEQA appeals delayed projects by an average of two and a half years.

A 2015 study by Jennifer Hernandez and others at the environmental and land-use law firm Holland & Knight, looking at all CEQA lawsuits filed during the three-year period 2010–2012, found that less than 15% were filed by groups with prior records of environmental advocacy. This study also found that four of five CEQA lawsuits targeted infill development projects; only 20 percent of CEQA lawsuits were targeted at "greenfield" projects that would develop open space.

Carol Galante, a professor of Affordable Housing and Urban Policy at the Terner Center for Housing Innovation at UC Berkeley, who served in the Obama Administration as the Assistant Secretary at the U.S. Department of Housing and Urban Development (HUD), stated that "It (CEQA) has been abused in this state for 30 years by people who use it when it has nothing to do with an environmental reason, ... NIMBY-ism is connected to the fact that for everyone who owns their little piece of the dream, there's no reason to want development next door to them, CEQA gives them a tool to effectuate their interest ... We need to fundamentally rethink how the CEQA process works in this state."

In an interview with UCLA's Blueprint magazine, Governor Jerry Brown commented on the use of CEQA for other than environmental reasons: "But it's easier to build in Texas. It is. And maybe we could change that. But you know what? The trouble is the political climate, that's just kind of where we are. Very hard to — you can't change CEQA [the California Environmental Quality Act]. BP: Why not? JB: The unions won't let you because they use it as a hammer to get project labor agreements."

While CEQA's original intent must remain intact, now is the time to end reckless abuses of this important law – abuses that are threatening California's economic vitality, costing jobs and wasting valuable taxpayer dollars. ... Today, CEQA is too often abused by those seeking to gain a competitive edge, to leverage concessions from a project or by neighbors who simply don't want any new growth in their community – no matter how worthy or environmentally beneficial a project may be. - Former Governors George Deukmejian, Pete Wilson, and Gray Davis in a 2013 editorial in The Sacramento Bee

A CEQA study (commissioned by the Rose Foundation, an environmental advocacy group) done by BAE Urban Economics, estimated that 0.7% of all CEQA projects with review documents had been subject to litigation, for the years 2013–2015. In San Francisco, the attorney general's office, during an 18-month audit of CEQA in 2012, found that 0.3% of (non-exempt) CEQA projects were subject to lawsuits.

Tax structures

Partially because Proposition 13 limits the property tax that local and state governments can collect, cities are incentivized to permit commercial development rather than residential development. Commercial development can potentially yield both sales tax revenue (car dealerships and shopping malls are examples of favored development due to their density of revenue), as well as business tax revenue (many cities levy either a payroll tax or a gross-receipts tax on all businesses located within their boundaries).

Residential development is typically seen as a net loss to a city's budget due to costs associated with service delivery (public safety, roads, parks, etc.) to residents exceeding the tax revenue received from those residents. For example, the city of Brisbane, when considering developing a greenfield (Brisbane Baylands development), was told that a housing-heavy development would bring in $1 million annually in additional income for the town, but a commercial development with no housing and a larger hotel would bring in $9 million annually—and that without building hotels, the development would be a net loss to the city budget.

High land cost and low density

High land cost and low-density development with very small increases in housing density, which in turn keep land prices high. The Sacramento Bee notes that residential land prices are more than 600% greater in coastal California than the average of America's other large metropolitan areas.

Coastal Commission

With quasi-judicial authority over zoning on the coastline and up to 5-mile inland (8.0 km), the California Coastal Commission has been an added hurdle for citizens and cities seeking to build housing. The commission was formed over opposition to the Sea Ranch development preventing access to the beach. Specific housing developments opposed by the Commission include 895 homes in Orange County, 50 homes for the disabled in Half Moon Bay, and 400 apartment units in Ventura County. The Commission sets fees and fines for permit violations and has levied million-dollar penalties. It has been called the single most powerful land use authority in the United States given the high values of its jurisdiction and its vast environmental assets, and that, because its members are appointed by the governor and the State Senate and Assembly leaders which have generally been Democrats, the Commission reflects a constituency that is important to Democrats. Some research has examined its effects in particular:

• UCLA researchers documented that quality-adjusted homes inside the commission's jurisdiction were 20% more expensive than those just outside it because of restrictions on housing supply and enhancements to natural amenities that increase demand.
• A UCSB research paper found that the Commission increased housing prices by restricting supply thereby "harming renters, future home buyers, and owners of undeveloped land", but existing homeowners in the commission's jurisdiction were beneficiaries of home price increases.

Construction costs

The state levies higher development fees for building a single-family home than in the rest of the country on average. The California Legislative Analyst's Office reported it to be 266% greater, $22k vs. $6k. For example, the developer planning to redevelop the site of a former Naval Hospital in Oakland with a residential community of 935 homes will be paying $20M (= $21k / home) in fees to the City of Oakland's affordable housing fund.

Labor costs are higher because of prevailing wage laws and that some projects are only approved if union labor is used. This was estimated at 20% more by the California LAO. The contribution of prevailing wage requirements to total construction cost has been estimated to be as large as a 40 percent increase.

Material costs are higher due to building codes and standards requiring better quality materials and higher energy efficiency.

Effects

Affordability

Median housing price by metro area

Median rent by metro area

Housing Affordability Index for California and Santa Clara County since 1991

This shortage has driven home prices and rents to extremely high levels. In 2017, the median price of a home in California was more than 2.5 times the median in the U.S. as a whole, and in California's coastal urban areas, the shortage was greater than the inland areas, as demonstrated by the median prices of homes in those respective markets: $1.3M in San Francisco, $1M in San Jose, and $600k in Los Angeles, while only $250k in Fresno. In the rental market, California now has the lowest vacancy rate the state has ever seen, at 3.6%; and while the median rent throughout the state for a two-bedroom apartment is $2,400, the median rent in coastal urban areas is even higher, surpassing $4,000 per month in San Francisco.

In 2023, the housing market in San Diego shows that nearly 60% of homes have listing prices above $1 million. The median home price in the city is $910,000, making it the fourth highest among the 30 largest U.S. cities. The average monthly rent in San Diego has risen to $3,175, placing it as the third-highest in the nation, only $7 less than that of San Francisco.

Housing affordability has declined over the last three decades; as of 2018, less than a third of Californians could afford a median-priced home; in job centers such as the San Francisco Bay Area, that number is less than a quarter. (Nationally, more than half of American households can afford the median-priced American home.) Housing unaffordability also leads to crowding, defined as more than one adult per room of a dwelling (counting two children as one adult). Californians are four times as likely to live in crowded housing as the average American, and this holds across every type of housing—renters, owners, those with and without children.

When comparing the rental rates of Los Angeles and the average rate across the United States one can see just how much higher the city is compared to the rest of the country. While in 2017 the average rental rate in the United States was $1,357, in comparison the average rental rate in Los Angeles in 2017 was $2,284, almost a $1,000 average increase.

Displacement and environmental impact

As a result, workers have moved to more affordable inland locations which requires longer commutes. As of 2018, the three cities in the United States with the largest share of super commuters—workers spending an hour and a half or more each way to get to and from their jobs—are Stockton, Modesto and Riverside. Workers have been displaced outside of the state as well; from 2007 to 2016, California saw net out-migration among all groups making under $110,000 a year, largely to Sun Belt states like Arizona, Nevada and Texas.

Longer commutes and increased traffic caused by suburban sprawl due to housing shortages concentrated in job centers increase greenhouse gas emissions. Because of California's mild climate and heavily renewable energy mix, transportation is the largest category of emissions in the state. When Californians emigrate to states with higher per-capita greenhouse gas emissions, they drive more, consume more energy for air conditioning, and use more fossil fuel-dependent electricity generation. Scarce, low-density housing is directly at odds with California's climate goals.

"You can't be pro-environment and anti-housing, ... You can't be anti-sprawl and anti-housing. This is something that has not been very well understood." – Marlon Boarnet, chair of the Department of Urban Planning and Spatial Analysis at USC.

Scientists at the Renewable and Appropriate Energy Laboratory at the University of California, Berkeley recently found that infill development, that is utilizing existing vacant urban structures for future housing or commercial use, has the potential to reduce CO₂ emissions; more so than any other option. Simply put, creating a denser housing structure limits the amount of travel time from work to home and back, thus limiting CO₂ emissions drastically. At governor Gavin Newsom's first legislative session, he pledged to make the housing crisis one of his top priorities. One such solution is the More Homes Act, which overrides restrictive zoning requirements by implementing small to midsize apartment buildings near major job and transit centers.

Poverty

When the cost of housing is factored into the poverty rate, as the Census Bureau now does in its releases of the "Supplemental Poverty Measure," California's poverty rate lists as the highest in the nation, (and has since 2011, when the Census Bureau first started releasing poverty by this measure) currently at 20.4%, or just over 1 in 5 people. The Public Policy Institute of California estimates that if the housing costs in California matched those for the nation overall, California's poverty rate would instead be 14 percent.

Homelessness

Main article: Homelessness in California

A homeless person sleeps on the sidewalk next to a limousine in the Mission area of San Francisco.

California in 2017 is home to an oversized share of the nation's homeless: 22%, for a state whose residents only make up 12% of the country's total population. The Sacramento Bee notes that large cities like Los Angeles and San Francisco both attribute their increases in homeless to the housing shortage. Homeless persons in California now number 135,000 (a 15% increase from 2015).

A study by the California Housing Partnership found that from 2016 to 2017 homelessness increased by 47 percent in Sacramento County (home to the state's capital, Sacramento), 36 percent in Alameda County, and 13 percent in Santa Clara County.

Nationwide, California ranks third for the most homeless persons per capita, behind New York and Hawaii.

In September 2019, the Trump Administration's Council of Economic Advisers released a report in which they stated that deregulation of the housing markets would reduce homelessness in some of the most constrained markets by estimates of 54 percent in San Francisco, 40 percent in Los Angeles, and 38 percent in San Diego, because rents would fall by 55%, 41%, and 39% respectively.

Economy

A 2017 study by Nobel Laureate in economics Edward Prescott, Lee Ohanian (senior fellow at the Hoover Institution), and Kyle Herkenhoff, estimates that if California were to roll back its land use regulations to where they stood in 1980, the state's GDP could permanently increase by almost $400 billion (a 14% increase). "If every state rolled back land regulations to 1980 levels, [total US] GDP could rise by as much as $1.8 trillion [9%]."

A McKinsey Global Institute report estimates that the housing shortage is costing the California economy between 143 and 233 billion dollars per year, from lost construction activity (at least $85 billion annually), lower consumption of consumer goods because of high housing costs (at least $53 billion annually) and the costs of providing services to the increased number of homeless persons (at least $5 billion per year).

Quantifying the shortage

Persons per housing unit for California and for the United States since 1940

Estimated under-supply of housing units

The California Legislative Analyst's Office 2015 report "California's High Housing Costs – Causes and Consequences" estimates that for the state to have kept housing prices no more than 80% higher than the median for the U.S. as a whole (the price differential which existed in 1980, as opposed to the >150% differential which exists today), California would have needed to add approximately 210,000 new housing units each year over the past three decades (1980–2010), rather than the 120,000 / year which were built. Their midpoint estimate of the underbuilding for the last three decades is 90,000 units per year, an estimated shortage of 2.7 million housing units (20%) by 2010.

Since 2010, the state's construction of new housing units has averaged well below 90,000 units per year. It took a drop after the 2008 Great Recession, but has increased to about 90,000 / year in 2016.

In September 2017, a team of economists from UCLA Anderson Forecast, led by Jerry Nickelsburg, predicted that "it would take 20 percent more housing to achieve a 10 percent reduction in prices. Such a reduction throughout California would bring costs down roughly to 2014 levels..." In a 2018 UCLA Anderson Forecast report, economist Nickelsburg estimated the shortage at 3 million units.

In October 2017, lieutenant governor and gubernatorial candidate Gavin Newsom said that California should set a goal to produce 3.5 million new homes by 2025. This would require a quadrupling of the current rate of building to almost 400,000 units per year, a rate the state has not experienced since 1954.

In April 2018, state Senator Scott Wiener, author of several bills to reduce the housing shortage, estimated it at 4 million units.

In a 2019 paper, economists Enrico Moretti and Chang-Tai Hsieh analyzed the U.S. housing market and found that if Americans had consistently built housing commensurate with demand, the city of San Francisco would have two million housing units (rather than the 400,000 it has today) and a population of four million people (as opposed to its actual 2022 population of around 815,000), and the greater Bay Area would have five times the population it has today.

Increase in housing production needed

Experts say that California needs to double its current rate of housing production (85,000 units per year) just to keep up with expected population growth and prevent prices from further increasing, and needs to quadruple the current rate of housing production over the next 7 years in order to for prices and rents to decline.

Ratio of residents and jobs to housing units

Jobs per housing unit for California and for the United States since 1980

In 2018, California ranked 49th among the United States in housing units per resident.

While some people claim that a "healthy" ratio of jobs to housing units is around two, many California metros are far from that, with San Diego at 3.9, Los Angeles at 4.7, and San Francisco at 6.8.

Permitting rate

From 2013 to 2022, California's local governments (who control the home permitting process) approved 2.6 new housing units per 100 residents, significantly lower than the nationwide average of 3.9. The state had the 37th lowest permitting rate in the country, with some states (Idaho and Utah) permitting at more than double California's rate. While California's permitting rate has been increasing, with the rate having increased 20% for the five years 2018–2022 compared to the previous five years, the state's rate still lags the nation as a whole whose 2018–2022 rate was up 33% compared to 2013–2017.

Responses

Federal

In a September 2016 report from the Executive Office of the President of the United States titled "Housing Development Toolkit", the authors cited several of California state and localities' attempted legislative fixes for the housing shortage as models that it recommends other states and localities also follow to abate their housing shortages, including:

• establish by-right development,
• tax vacant land or donate it to non-profit developers,
• streamline or shorten permitting processes and timelines,
• eliminate off-street parking requirements,
• allow accessory dwelling units, and
• establish density bonuses.

The report also highlighted one of President Obama's remarks to the U.S. Conference of Mayors on January 21, 2016:

We can work together to break down rules that stand in the way of building new housing and that keep families from moving to growing, dynamic cities.

State

2016 Legislative session

In September 2016, Governor Jerry Brown signed AB 2406, AB 2299, and SB 1069, all of which reduce the cost and bureaucracy needed to construct an ADU (Accessory Dwelling Unit), also known as a "granny flat" or "in-law unit". The Bay Area Council notes that if only 10 percent of the Bay Area's 1.5 million single family homeowners build ADU's, that would create 150,000 units of new housing.

This change resulted in dramatic increases in applications for ADU building permits; Los Angeles saw 25 times as many applications in the 2017 calendar year than it did in the previous two years combined.

2017 Legislative session

In the 2017 legislative session, a package of 15 housing bills was passed. One bill legalizes microapartments as small as 150 sq. ft. and prohibits cities from limiting their numbers near universities or public transit; another (SB 2) adds a $75 real-estate document recording fee (for everything other than property sales), which is projected to generate $250 million per year for affordable housing construction. The total 2017 housing package is expected to have only a minimal impact on the shortage, because even the most optimistic predictions suggest that the measures will increase yearly housing production by about 14,000 units per year, still well short (14%) of the additional 100,000 new units needed yearly (in addition to the 80,000 being produced yearly) just to keep pace with population growth and prevent prices from rising.

Senate Bill 35

Main article: California Senate Bill 35 (2017)

Another bill was Senate Bill 35 (SB 35), authored by state Senator Scott Wiener which shortens the approval process by eliminating environmental and planning reviews for new infill housing in cities which have failed to meet their state housing production goals. The state sets goals for production of different types of housing: market-rate, low-income, etc., (to keep up with expected population growth) and this law applies only to development types for which the city is not meeting its production goal. To make use of the streamlined approval process, the developer must pay prevailing wage and abide by union-standard hiring rules. Wiener said, "Local control is about how a community achieves its housing goals, not whether it achieves those goals.... SB 35 sets clear and reasonable standards to ensure that all communities are part of the solution by creating housing for our growing population." SB 35 has been used, for example, to redevelop the derelict Vallco Shopping Mall in Cupertino into a mixed-use development containing 2,402 apartments, half of them affordable, with no government subsidies, which will quintuple Cupertino's affordable housing stock.

2018 Legislative session

Senate Bills 827 and 50

Main article: California Senate Bill 50 (2019)

In 2018, Senator Wiener introduced SB 827, which would have required localities to allow buildings of at least 4 or 8 stories within a half-mile of a high-frequency transit stop, or within a quarter-mile of a bus or transit corridor, as well as waiving minimum parking requirements in those areas. The bill was controversial, being opposed both by local governments concerned about the loss of local control of zoning, and by anti-gentrification activists concerned about displacement. The bill was supported by a group of scholars who stated that it would help reduce decades of racial and economic residential segregation, as well as pro-housing groups nationally, and by over 100 San Francisco Bay area technology industry executives who voiced their support of the bill in a joint letter.

Regarding the issue of local control, Wiener said: "In education and healthcare, the state sets basic standards, and local control exists within those standards. Only in housing has the state abdicated its role. But housing is a statewide issue, and the approach of pure local control has driven us into the ditch." Anti-displacement provisions were inserted in response to gentrification concerns. It was subsequently defeated in its first committee hearing.

In December 2018, Senator Wiener introduced a similar bill for the following legislative session, SB 50, which was defeated in a senate floor vote in 2020.

2021 Legislative session

In September 2021, Governor Gavin Newsom signed a package of 31 housing bills, including the California HOME Act (SB 9) and SB 10. The California HOME Act (SB 9) upzones most of California to allow building denser housing, up to a fourplex, on a lot. SB 10 streamlines the process for local governments to build dense housing around transit rich areas. Other bills aim to streamline the homebuilding process, reduce barriers to building affordable housing, and hold local governments responsible for building more housing.

Other bills that Governor Newsom signed include SB 290, AB 1584, SB 478, and AB 602. SB 290 expands California's density bonus law to include affordable housing for low income college students. Density bonuses allow developers to build denser housing, so long as a portion is set aside for affordable housing. AB 1584 makes void any housing covenants that would prohibit the construction of an ADU in certain circumstances.

SB 478 creates a minimum floor area ratio and a minimum lot size for multi-family housing that's between 3 and 10 units. SB 478 also prevents local governments from imposing a lot coverage requirement that would make it impossible for a housing project to achieve its minimum floor area ratio. AB 602 regulates impact fees that local governments can charge on housing. AB 602 makes impact fees more transparent, and requires local governments to make impact fees proportional to the square footage of the house.

2022 Legislative session

In September 2022, Newsom signed a package of housing bills, including AB 2011, SB 6 and AB 2097.

AB 2011

AB 2011 has officially gone into effect as of July 1, 2023. The policy allows for affordable and mixed-income housing to be built on commercially-zoned property on a ministerial, by-right basis, as long as the projects fulfill affordability and environmental criteria, and pay prevailing wage. Additionally there is a requirement for the use of apprenticeship programs that are approved by local governments. When these contracts are being accepted by contractors they will also be provided with health care expenditures. This being a new and more recent Bill studies will be conducted by the Department of Housing and Community Development which will be used to present to legislature on the effects and results of the additional housing developments.

Important Definitions

Housing is considered affordable if a household is spending 30% or less of their monthly income toward their rent or mortgage. Affordable housing is housing specifically allocated for individuals earning 80% or less of the area median income (AMI) of the region they reside in, and restrics their rent payment to 30% of their monthly income. Mixed-income housing is defined by Brophy and Smith as "a mix of subsidized and market-rate housing".

Commercially-zoned property under this policy includes, "office, retail, or parking". Developers are able to use AB 2011 to develop residential units on commercially-zoned property without the need for rezoning of a parcel, a lengthy process that can last several months. Additionally, this policy also allows for project exemption from CEQA, which is beneficial since exemption can expedite the development process exponentially. This is especially crucial for affordable housing developments, as CEQA is often weaponized by NIMBY's to thwart projects from reaching approval.

AB 2011 Considerations with Affordable Housing

Although this policy will expedite the project approval process, requiring prevailing wage poses a major problem for 100% affordable housing developments (where all units are income restricted). The requirement of prevailing wages leads to complication in financing development, as prevailing wage potentially raises construction costs by up to 40%. This increase creates obstacles for the financial feasibility of affordable housing developments, as affordable housing financing is far more complex than market-rate housing. Funding involves hard loans from banks accompanied by multiple state and municipal grants, all of which are difficult to qualify for and obtain as there are many affordable housing developers competing for the same funds. When construction requires an affordable housing developer to pay prevailing wages, it becomes even more strenuous to finance the construction cost increase. This is because receiving funding awards from public subsidies is competitive and affordable housing developments generate a low rental cashflow every year because they charge low rents; hence, they are unable to support a larger loan payment. The requirement of prevailing wage for construction can potentially mean that the development is financially infeasible, and the affordable development may not move forward or may not proceed with approval under AB 2011.

SB 6 and AB 2097

SB 6 allows for residential use on commercially zoned property without requiring a rezoning, as long as a percentage of construction workers hired are unionized. AB 2097 removes parking minimums for homes and commercial properties within one mile of public transit stations or in neighborhoods with low rates of car use. California became the second state after Oregon to eliminate parking minimums near public transit.

2023 Legislative Session

In October 2023, Newsom signed another package of housing bills. Notable bills include SB 4, SB 423, and SB 555.

SB 4

SB 4 makes it so that religious institutions or higher education institutions can submit applications for streamlined approval for building housing on their lands, granted that it satisfied criteria and that all of the units are made available for lower-income households. The bill is part of a greater movement by faith communities in the U.S. to build affordable housing called "Yes, In God's Backyard." The movement has, in the past, struggled with getting past the red tape over adaptive reuse of their property, especially with city or local opposition. SB 4 is part of a series of California bill efforts since 2020 to make it easier for churches, as well as other faith communities and higher education institutions, to build on their lands, including an assembly bill (AB 1851) which reduced or eliminated parking requirements for such projects. For California, the possibilities of what can be built using this law is not limited: statistics of church real estate show that there is quite a lot of church property in Oakland and Berkeley which could provide a substantial amount of land to build more housing on.

SB 423

SB 423 comes as an extension of SB 35, a bill that expedites processes for housing developments in areas with higher needs. Such need is assessed using Regional Housing Needs Assessment (RHNA), which was part of what was written into law in SB 35. SB 423 specifically expands the streamlining outlined in SB 35 by allowing the state to supersede the local government in passing the review and to make it easier for multifamily developments in coastal zones. This is a victory for pro-housing advocates, as the California Coastal Commission has been a major source of opposition to housing developments on the coast. Opponents are concerned about the housing threatening the local beach environment and wildlife. Pro-housing advocates argue that housing must be built everywhere, but the coast provides an especially good opportunity as it is nearer to jobs, recreation, and less car-centric living, which ultimately means less pollution. Beyond advocates and opponents, the commission itself historically has blocked almost all housing on the coastal zones, with the consequence being even higher housing prices than in other areas.

SB 555

The introduction of SB 555 indicates a shift in housing priorities, turning away from solely the private rental market or homeownership to explore alternative forms of tenure. The bill introduces a plan to implement 1.4 million units of social housing, which is permanently kept from the private market and being bought out. This provides protections for renters and hopes to create a subsection of housing that is not based on speculation and instead creates secure mixed-income communities. The bill first mandates that its department of housing (HCD) completes a California Social Housing Study completed by the end of 2026, which will create recommendations and analysis on social housing and what the best options for the state are.

Other efforts

Since 2014, several YIMBY (Yes In My Back Yard) groups have been created in the San Francisco Bay Area. These groups lobby both locally and in Sacramento for increased housing production at all price levels, as well as using California's Housing Accountability Act ("the anti-NIMBY law") to sue cities when they attempt to block or downsize housing development. One activist, in a comment to the San Francisco Planning Commission supporting the construction of a new 75-unit mostly market rate housing development stated that: "The 100 or so higher income people, who are not going to live in this project if it isn't built, are going to live somewhere...They will just displace someone somewhere else, because demand doesn't disappear."

As a way to rapidly create inexpensive housing, a Bay-Area startup company converts 8' x 20' shipping containers into homes for as little as $8,000, though due to expensive ($3,000– $5,000 for a permit) and restrictive zoning in many cities, has found it hard to find locations that will allow the homes.

There are over 400,000 deed or use-restricted affordable housing units in California which were built with the provision that they remain affordable for the following decades (generally between 30 and 55 years) in exchange for subsidies. The state's Department of Housing and Community Development (HCD) estimates that there are more than 35,000 units whose affordability requirement will expire by 2021 and that many of these will likely be converted to market rent units. HCD has made the preservation of these units as affordable housing a priority.

Under the federal government's Section 8 voucher system, residents pay 30% of their salary and the Housing Authority pays the difference of the rental cost. As indicated by Metcalf (2018), "In 2015, 2.2 million households, comprising 5 million people, used rental vouchers to secure housing in the private market" though these figures are for the entire United States. Unlike other public assistance programs (such as SNAP or Medicaid) there are only a limited number of Section 8 vouchers, meaning that most people who apply and qualify for the program are not able to participate in the program, and instead are placed on a wait lists for years. The Housing Authority of the City of Los Angeles closed its Section 8 wait list for over a decade due to high demand, and only reopened in 2017.

See also

• San Francisco housing shortage
• Cost of rent by state and county in the United States
• Affordable housing in Silicon Valley
• 2000s United States housing market correction

Further reading

• Dougherty, Conor (2020). Golden gates: the housing crisis and a reckoning for the American dream. Penguin. ISBN 9780525560234.
• California's High Housing Costs – Causes and Consequences (2015) by the California Legislative Analyst's Office

External links

• Gimme Shelter: A California Housing Crisis Podcast by Liam Dillon of the L.A. Times and CalMatters
• Housing Needs By State: California, Washington, DC: National Low Income Housing Coalition