Notes

Outline

To House a Nation…. The View from California Briefing for the Millennial Housing Commission June 5, 2001 Oakland, California

California Unusual 50 years of continuous growth - 10 million every generation. The nation’s  most progressive housing requirements matched against the nation’s most complicated, costly, and risky entitlement process. Guess which wins? Extraordinarily costly development inputs. Business of housing production dominated by large, innovation-averse builders. Homeownership is an essential part of the California dream, yet state homeownership rate is 10% below national average. Still plenty of appropriate land for housing construction (infill & greenfield) yet paralyzed by sprawl fears.

Outline Need Estimates Sources of the Problem Federal, and State Funding Responses Policy Suggestions

Estimates of Need Raising the Roof (HCD, 2000; from 1995 AHS) Currently about 2.4 million California households need some form of housing assistance (are low-income and are over-paying). If that percentage stays constant at 22%, the number of households needing housing assistance could rise to 3.7 million by 2020. Still Locked Out (California Budget Project, March 2001, from 1999 AHS) Statewide, 2.3 low-income renter households per affordable unit, or a shortage of 581,000 units. About half of California renters pay more than 30% of their income for rent 90% of low-income renters “overpay” for rent 79% of low-income home-owners overpay.

How Many California Households Overpay?  Between 1.1 and 3.5 million

The Source of the Problem:  A Conceptual View

The Late 1990s:  A Job Growth/Housing Permit Imbalance

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Slide 9

Supply Shortages and the Housing Affordability Crisis

1997 Multi-family Rent Gaps {Required vs. Achievable Rent} in Six California Markets

Bay Area* Residential Infill & Refill Capacity (Assuming Historical Local Densities)

Past and Future Housing Shortfalls -Causes Growth, Growth, and More Growth Planning Disconnect Between Jobs and Housing CEQA and the Rise of Permitting over Planning Unfavorable Economics of Mid-Market Apartment Construction The “Impossibility” of Infill/Refill Local Annexation Policies and General Plans that are Blind to Future Growth

Summary: Past and Future Housing Shortfalls-Causes Density and Housing Disincentives Homebuilder Myopia/Lack of Built-in Neighborhood Value Uncoordinated Approaches to Providing Low-Income Housing and Assisting Low-Income Households

Lagging Incomes

More Poor Households

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1998 Federal Low-Income Housing Assistance to California by Program (excludes CDBG, HOME & ESG)

1996-98 Avg. Annual California Housing Assistance Programs (excludes HCD low-income programs and non-RDA local programs)

Triple Whammy This “triple whammy” of population growth, escalating rents, and a declining affordable housing stock will put further strain on an already over-stressed system, and turn what is currently a large housing needs gap into a vast canyon. Raising the Roof, p 138.

The $64 Billion Question Either affordable housing is a matter of statewide importance or it isn’t.  If it is, “business as usual” shouldn’t be the norm. Land use and regulatory reforms (“sticks”) Incentives for good behavior (“carrots”) Piggyback federal subsidy programs Ramp-up state and local subsidy programs

Big Picture Strategies Reform the local planning and permitting process to expand the supply of market-rate and moderate income housing to check and (gasp!) maybe even reverse future rent and price increases. Promote increased infill, especially land recycling. Increase state bond funding for affordable housing. Increase local funding for affordable housing, particularly RDA funding. Where appropriate establish and expand affordable ownership programs.

Federal Housing Policy: Providing a Stable & Supportive Framework Make Section 8 vouchers an entitlement for all households with less than 50% AMI. Fund 5 year Section 8 commitments. Make them completely transportable within MSAs. Increase HOME funding and target to high cost states. Allocate LIHTC to states based on size of population in need rather than population. Continue HOPE VI.  The mixed-income model works. Push Fannie Mae and Freddie Mac on the multi-family side. Federal innovation grants for housing construction of housing on infill & recyclable lands. Matching housing /supportive services block grants from HHS.

State Housing Policy: Carrots and Sticks for Expanded Production Increased bond financing  to more aggressively reward SF and MF infill development (e.g., help pay for infrastructure upgrading) Take the lead in identifying and conserving environmentally sensitive lands. Planning assistance funds for local specific planning, infill housing planning, and 20-year capital improvements planning. Strengthen housing element law to require more explicit identification of future development sites in land use element.

State Housing Policy: Carrots and Sticks for Expanded Construction State over-ride laws requiring UGBs to include 20-year land supplies (evaluated at recent densities); and eliminating use of fiscal impact criteria for rejecting housing projects in jurisdictions with large outstanding housing needs. Increase housing redevelopment set-aside requirement to 40%, and allow TIF use for residential area parking and traffic improvements. State HOME program to match local housing trust funds State law requiring 20% inclusionary units (80% or lower AMI) in jurisdictions with very low (e.g., 3% or less) vacancy rates.

Doing Nothing Shouldn’t be an Option We can’t continue to rely on periodic economic downturns to restore housing affordability. Over-payment, over-commuting, and over-crowding can get worse. High market-rate housing prices do ultimately feed-back into the economy, adversely affecting economic growth. Failure to act will result in the emergence of two classes of Californians: homeowners and “permanent renters.”