State Threatens Encinitas With Lawsuit Over Housing Policy

Encinitas housingGov. Gavin Newsom’s administration has put another coastal town on notice that it must meet state mandates to add a significant amount of units affordable by low-income families – reflecting the newly elected governor’s view that a lack of housing is one of California’s biggest problems.

In a Feb. 4 letter to the city of Encinitas, state housing official Zachary Olmstead said the city needed to ”amend or invalidate” a 2013 ordinance approved by voters that said developers had to get voters’ blessing if they wanted to increase the density of their projects or make zoning changes. The letter noted that this law and other city actions had the effect of blocking Encinitas from meeting state requirements that it add 1,141 affordable units. The city of 63,000 has few such units now.

While the Encinitas City Council once seemed as strongly anti-growth as the public, state threats under the Jerry Brown administration led the council in 2016 and 2018 to seek voters’ approval of what’s known as a Housing Element plan, failing both times. The plan is a formal document submitted to the state that outlines what projects will be built so that the city meets its commitment to “accommodate the housing needs of Californians of all economic levels.”

Like Huntington Beach, Encinitas could face lawsuit

Encinitas is the only city in San Diego County without a similar state-approved plan. It is among the richest cities in the country. As of the latest Zillow data, the median average home price is $1.05 million, and the latest RentCafe data puts the average monthly rent at $2,056.

While the 2013 city law targeted by the state has already been suspended until 2021 by a Superior Court judge as being pre-empted by state law, that wasn’t viewed as going far enough by state officials. Olmstead’s letter cited the cumulative effect of a “complex set of regulations” that make it impossible for new projects that would help the city comply with state requirements.

If Encinitas officials don’t change course, the letter warned that state grants might be withheld, including for transportation projects funded by the Legislature’s 2017 increase in state vehicle taxes – and that the Newsom administration would ask Attorney General Xavier Becerra to sue the city for defying state law.

In a case involving the same issues, the state and the city of Huntington Beach filed lawsuits against each other last month in Orange County over whether Huntington Beach is breaking state housing laws. Becerra says 2017 legislation passed in Sacramento clearly empowers his office to sue to enforce plainly written state mandates. Huntington Beach City Attorney Michael Gates, however, says as a charter city – one with its own voter-approved de facto constitution – Huntington Beach has the authority to reject some state edicts that infringe on the city’s right to self-govern its “municipal affairs.”

Can charter cities claim exemption from mandates?

A League of California Cities primer on the rights of charter cities offers ammunition for Huntington Beach’s claim. It notes that with “some exceptions,” charter cities control land-use and zoning decisions. But a 1975 Loyola University of Los Angeles Law Review analysis cited by the league said ambiguous language in state law left it unclear precisely when charter city ordinances took precedent on land-use issues.

Encinitas is a general law city not eligible for charter city protections from some types of state interference. But if Encinitas officials proposed and city voters approved a charter city amendment in a special election, Encinitas could become a charter city within months.

Last year, after disputes with the state, officials in Menlo Park in Silicon Valley considered a quick push for charter city status before putting the issue on hold for the time being.

This article was originally published by CalWatchdog.com

Does California Even Know How to Fix Its Housing Problem?

Housing apartmentNew Gov. Gavin Newsom’s budget asks for $500 million to boost construction of housing for “moderate income” Californians. Housing, he said while introducing his first budget, “is the issue.”

He is correct. Everyone is aware of the grim state of housing in California. But no one, at least those with enough political influence to shift policy, seems capable of putting forth changes that will make a bit of difference.

It would help if policymakers stopped targeting segments of the housing market for special attention, as Newsom did with his $1.75 billion request for housing initiatives that includes $500 million for middle-income housing and $300 million for a low-income home-building program.

Though a focus on “affordable housing” might seem a good starting place, it’s a distraction.

Yes, those at the lowest income wealth levels are hurt the most in an environment in which even the middle class is increasingly priced out of the market. But a preoccupation on expanding “affordable housing,” defined by the federal government as housing costing less than 24 percent of an area’s median income, will not end the suffering.

What California needs are homes of all types: large, single-family houses on big lots, medium-sized houses on modest lots, small homes on small lots, McMansions, suburban tract homes, high-rise apartments, townhomes, condominiums, duplexes, triplexes, quadplexes and granny flats.

The fixation on “affordable housing” misses an important trickle-down effect. Though it’s typically assumed building new homes for higher-income households does nothing to increase the supply of lower–end housing, documented evidence refutes that claim. According to the non-partisan Legislative Analyst’s Office, “facilitating more private housing development in the state’s coastal urban communities” — where the practice of NIMBYism is a most vicious art — “would help make housing more affordable for low–income Californians.”

“Building new market-rate housing,” the LAO continues, “indirectly increases the supply of housing available to low–income households in multiple ways.”

New housing causes existing housing to become less desirable, and therefore drives down prices. It also “eases competition between middle- and low-income households.” As more affluent households that had decided to stay in low-income neighborhoods due to limited housing choices are able to move up, their homes become available for lower-income households.

Focusing on affordable-housing programs has only a limited effect, says the LAO, as it is “extremely challenging and prohibitively expensive.” The annual funding commitment would be “roughly the magnitude of the state’s largest General Fund expenditure outside of education (Medi-Cal),” which spends roughly $20 billion a year in General Fund dollars.

California policymakers truly have odd ideas about how to relieve the housing crunch. More than a dozen cities have rent-control laws, which make the problem worse by taking out the incentive to build.

A few politicians think that price-gouging laws applied to rental housing will be helpful, while others call for more public housing funds, convinced the state can spend its way out of the crisis.

Some lawmakers believe raising the cost of real-estate transactions is the answer. Yet, hiking residential and commercial property taxes, and forcing contractors to include below-market rate housing in their developments are two more ideas that are incorrectly considered to be correct pieces to the housing puzzle.

Meanwhile, Oakland’s city hall operates under the delusion that forcing landlords who want to move into their own home to pay their tenants as much as $9,875 for the privilege of doing so is a reasonable solution. The city’s Uniform Relocation Ordinance clearly an illegal seizure of private property by the government.

It’s no surprise that a few other cities have similar ordinances. The penalty in San Francisco can be as steep as $19,897.15 per unit, and it would have been much higher — $50,000 — had not the First District Court of Appeal ruled against the higher fee in 2017, rightly blaming the city’s rent-control laws, not homeowners, for the city’s housing shortage.

What’s particularly galling about California’s housing misery is that lawmakers in both parties know the only remedy is to remove government hurdles to building. Yet those holding the political power to make corrections move in the opposite direction. Until they sharply change course California will continue to be a hard place to live.

This article was originally published by the Pacific Research Institute

How to NOT Solve California’s Housing Crisis

house-constructionThere are obvious reasons the median home price in California is $544,900, whereas in the United States it is only $220,100. In California, demand exceeds supply. And supply is constrained because of unwarranted environmental laws such as SB 375 that have made it nearly impossible to build housing outside the “urban service boundary.” These laws have made the value of land inside existing urban areas artificially expensive. Very expensive. Other overreaching environmentalist laws such as CEQA have made it nearly impossible to build housing anywhere.

Then there are the government fees attendant to construction, along with the ubiquitous and lengthy permitting delays caused by myriad, indifferent bureaucracies with overlapping and often conflicting requirements. There is a separate fee and a separate permit seemingly for everything: planning, building, impact, schools, parks, transportation, capital improvement, housing, etc. Government fees per home in California often are well over $100,000; in the City of Fremont in 2017, they totaled nearly $160,000 on the $850,000 median value of a single family home.

This is a shakedown. It has caused a politically engineered housing shortage in California that enriches billionaire property developers that have the financial strength to withstand decades of delays and millions in fees, because they reap the extreme profits when they sell these homes at inflated prices. Also enriched are the public servants whose pay and pensions depend on all taxes – definitely including property taxes – and all fees being as stratospheric as humanly possible. Public employee pension funds also benefit from housing scarcity, as their real estate investment valuations soar into bubbleland.

When litigious environmentalists, insatiable public sector unions, and an elitist handful of left-wing oligarchs control a state, artificial scarcity is the consequence. Welcome to California.

REJECTED POLICY – REAL SOLUTIONS TO THE HOUSING CRISIS

To decisively solve California’s housing shortage, some of California’s more than 25,000 square miles of rangeland, currently occupied by cattle, would have to be approved for suburban development. California is only 5 percent urbanized, although if you listen to environmentalists, you might get the impression it only had 5 percent remaining open space. You could fit ten million people onto half acre lots in four person households and you would only use up 2,000 square miles – that’s only 1.1 percent of California’s land area. Why aren’t massive new housing developments spreading out along California’s 101, I-5 and 99 corridors?

Real solutions to California’s housing crisis would also require increasing the capacity of California’s water infrastructure and transportation infrastructure. In both cases, investment would be cheaper if this expansion was done on raw land. Real solutions to California’s housing crisis would mean rescinding the mandatory rooftop solar requirement on new home construction, and instead recommissioning and expanding the nuclear power complexes at Diablo Canyon and San Onofre, and embracing development of additional nuclear power and natural gas power plants. In a less confiscatory regulatory environment, the private sector could fund all of this while lowering costs to consumers.

Reforming environmental restrictions and unleashing private sector development of homes and infrastructure is the fastest, easiest way for home prices in California to return to near the national average. In turn, that would solve nearly every problem associated with a shortage of housing. California’s families would be able to afford to buy homes, or pay affordable rent. California’s employers, most definitely including government agencies, would be able to attract workers at prices that would not break their profits or their budgets, which would benefit the economy. And far fewer people would be rendered homeless.

APPROVED POLICY – COMPLETELY USELESS “SOLUTIONS” TO THE HOUSING CRISIS

As long as environmentalist litigators, public sector unions, and left-wing oligarchs run California, none of these real solutions will ever happen. What are they proposing instead?

To summarize, all politically viable housing solutions in California involve densification, i.e., cramming ten million more people into existing urban areas, and, predictably, more taxes, bonds, fees, subsidies and government programs.

Rent Control, Government Subsidized “Affordable Housing” and Government Funded Homeless Shelters

California is the epicenter of America’s “progressive” power structure. In California, in addition to controlling the public bureaucracy through their unions, progressive ideologues control the press, social media, search media, K-12 public education, academia, most corporations, the entertainment industry, and virtually all serious political campaign spending. As a result, California’s progressives can use ballot initiatives to con a brainwashed populace into approving their latest housing policy agenda. The common thread? Government control; government funding. For example, on the ballot this November are propositions to permit cities and counties to enact rent control, issue state bonds totaling $4 billion to build “affordable housing,” and use state tax revenues to build more government-run homeless shelters. It is possible all three of these measures will pass.

Already in progress is the implementation of California state laws that took effect Jan. 1 – AB 2299 and SB 1069 – which amend existing state laws governing “accessory dwelling units.” These new laws force California’s counties to streamline the process whereby homeowners can construct additional homes in their backyards. Does that sound good? Not so fast.

Doubling Suburban Population Densities ala Government Subsidized “Accessory Dwelling Units”

There’s a reason people work hard for decades to pay off their mortgages so they can own homes in spacious suburbs. It’s because they value the leafy, semi-rural atmosphere of an uncrowded suburban neighborhood. AB 2299 and SB 1069 will effectively double the housing density in these neighborhoods, violating the expectations of everyone living there who relied on the zoning rules that were in effect when they bought their homes.

If zoning laws in existing suburbs were relaxed at the same time as zoning restrictions were lifted on the urban periphery, the impact of these new rules might be mitigated. But every policy California’s elite and enlightened geniuses come up with is designed to maintain “urban containment.” And to add to the disruption these laws will inflict on quiet neighborhoods, California’s cities – starting with Los Angeles – are providing subsidies to homeowners to build these homes, then encouraging them to rent the properties to low income families wherein the government will pay the rent via Section 8 vouchers.

This is an expensive, utopian scheme that oozes with compassion but is fraught with problems. Doubling the density of suburbs is already problematic. But doubling the density of suburbs by subsidizing the settlement of people on government assistance into every backyard, invites social friction. It is forcible integration of people who, for whatever reason, require government assistance to support themselves, into communities of taxpayers, who, by and large, are working extra hard to pay the mortgages on overpriced homes in order to provide their children with safe neighborhoods.

As usual, when it comes to enlightening the public, neither the media, nor the urban planning experts in academia, ever offer much beyond pro-densification propaganda. A glowing New York Times article, entitled “A Novel Solution for the Homeless: House Them in Backyards,” raves about this entire scheme, already being tried in Los Angeles, Portland and Seattle. The article includes a quote from Vinit Mukhija, a professor of urban planning at UCLA, who says: “The value [of subsidized accessory dwelling units] goes beyond that, though, because it is finally somewhat of a departure of the purity of single-family housing in the region. It’s a good step to change what people here really consider a dogma of private housing.”

The “dogma of private housing.” That epitomizes California’s elitist hostility towards ordinary families owning detached homes with spacious yards.

The incentives created by such a project are perverse. California’s elite has made homes unaffordable. Then, to the people who sacrificed so much to buy these homes despite their punitively high prices, the government offers them subsidies and Section 8 payments, if they are willing subdivide their lots and turn over half their property to people supported by the government. Inevitably, many financially struggling homeowners will be forced to accept this cruel bargain if they want to keep their homes.

Finally, just like in 2008, there will eventually be another economic downturn, when many distressed homeowners will be forced to sell their properties. And when that happens, just like in 2008, investment banking speculators will move in and buy homes by the thousands. This next time, however, these institutional investors will be salivating at the prospect of collecting government subsidies so they can operate two rental units on a single piece of property.

Demolishing Homes to Build High Rises Near Transit Stations

Another way California’s elites – many of whom live in gated communities with homeowner covenants prohibiting nasty things like accessory dwelling units in backyards – propose to solve California’s housing crisis is to force demolition of single family dwellings in the vicinity of mass transit stations. They support this mass destruction of vintage neighborhoods in order to make room for high density apartments and condominiums up to five stories in height. While an attempt in 2018 to enact this draconian solution was beaten back, California’s coercive utopian lawmakers will bring it back in 2019. Some form of this law is likely to pass.

There’s nothing wrong with gradually increasing the population density in the core of large cities. That is a natural and organic process. But it is the job of legislators and local officials to moderate that process, protecting established neighborhoods. Instead, again, the policy consensus in California is to cram ten million new residents into existing urban areas.

Government Subsidized Homeless Shelters on some of the Most Expensive Real Estate on Earth

Perhaps the most misguided housing policies coming out of California concern the homeless. Despite years of bloviating by the compassionate elite, almost no good data is available on homeless populations, much less any good policies. Press coverage of the homeless centers on the family unit; small children, parents forced out of their home by high rents. These are gut wrenching stories. But accompanying the legitimate cases of families or individuals coping with undeserved hardship, there are the willfully indigent, along with criminals, drug dealers, sexual predators and perverts. Again, the City of Los Angeles offers a striking example of bad policy.

In Venice Beach, which is within Los Angeles city limits, along one of the most expensive, touristy stretches of coastline in the world, there are now permanent homeless encampments. To address the challenge, Los Angeles city officials are fast-tracking the permit process to build a homeless shelter on 3.2 acres of vacant city-owned property less than 500 feet from the beach. This property, nestled in the heart of Venice’s upscale residential and retail neighborhoods, if commercially developed, would be worth well over $200 million. Imagine what could be done with that much money if the goal was to truly help the homeless. And by the way, the proposed shelter will be a so-called “wet” shelter, meaning that drugs and alcohol will not be permitted inside the shelter, but intoxicated homeless individuals will be allowed inside. Go in, get a bed, go out, shoot up, come back in.

That a solution so scandalously inefficient could even be considered by the do-gooders running City Hall in Los Angeles offers additional insights into the minds of California’s progressive elite. Solving the homeless crisis isn’t their goal here. Rather the intent is to create additional government-owned properties, hire additional government bureaucrats, while preening in front of television cameras and pretending to solve a problem. Should the Venice Beach property be developed as currently proposed, well connected construction contractors will rake in government funds, so eventually “up to 100” homeless people will find shelter. Meanwhile, thousands will remain outdoors.

California’s housing is unaffordable because of restrictive laws such as CEQAAB 32SB 375, and countless others at both the state and local level. At the same time, California’s political elites are are inviting in the world’s poor en masse to come and live here. An estimated 2.6 million illegal aliens currently live in California. But the rhetorically unassailable compassion expressed by these sanctuary policies does nothing to alleviate hardship in the nations where these refugees originate, because for every thousand who arrive, millions are left behind.

The result? While California’s visionary rulers engineer a shortage of housing supplies, their welcoming sanctuary policies engineer a burgeoning housing demand. This is the deeply flawed agenda they have implemented in California and are actively exporting to the rest of America.

The biggest lie of all is the compassionate overlay that informs every housing solution California’s elite promote. Because their solutions, however viable they may be politically, will not work. They defy basic economic sense. They create additional drain on public funds while doing nothing to alleviate the high prices that are caused by scarcity. They are sustained by an impossible assumption, that urban densification, and all the destruction that densification will bring, will in itself be sufficient to restore a supply and demand equilibrium for housing. And they reject the obvious solution, suburban expansion to complement higher densities in the urban cores, based on environmentalist objections that are overwrought. In practice, the solutions being implemented to resolve California’s housing crisis are not compassionate. They are cruel.

Eventually, enough Californians are going to realize they’ve been conned. They will recognize that government subsidized densification is financially unsustainable and ruinous to their way of life. They will support politicians who are willing to stand up to environmentalist litigators, government unions, and the left-wing oligarchy that profits from scarcity. Hopefully that will happen before it’s too late.

Bring Back Blight, Sprawl; evict CDBG to Fix Affordable Housing

HousingWhen you were a child did you ever try walking down the upward side of an escalator at a mall? It can be dangerous and often results in bringing you back to where you started.

Howard Husock’s recent “How to build a Housing Ladder: Lessons From, and For, Silicon Valley” (Oct. 3, 2018) is an analogous backwards attempt to solve the Silicon Valley affordable housing crisis.

Husock’s solution is to build new “middle housing” (2-to-9-units), in areas where there is a lack of developable land:

  • As part of mixed commercial-residential developments
  • Elevated above parking lots in air rights projects
  • Converting open space in office parks
  • Small multifamily housing projects on “greenfield” (unzoned) land

From 1979 to 1985, I implemented every one of Husock’s above policy prescriptions with negligible results when I worked for the LA County Community Development Block Grant program:

  • A study for a 1,000-unit multi-family housing air rights project proposed to be built over a bus yard in West Hollywood (never built)
  • Funding a land-write down for a 100-unit Section 202 high-rise senior housing project on commercial zoned land adjacent to a shopping center in West L.A.
  • Soliciting a design-build contract for a 12-unit energy-efficient multi-family housing project on infill land in East Los Angeles
  • Relocating and rehabilitating new freeway construction removal houses to vacant sites for affordable housing,

* From 1985 to 2014, I played a role at a utility district in selling surplus land for housing development on “greenfield” (raw, unzoned land) sites.

Similarly, HUD CDBG policies have yielded insignificant results in the Palo Alto Peninsula as unaffordability and homelessness have only increased.

CDBG Housing Funding Drawdown Failure

CDBG is a federal HUD flexible revenue sharing program that can be used at the local level for housing and infrastructure improvements in lower-income target areas. The drawdown rate for CDBG funding for housing for California is the worst in the country at $4.83 unexpended for every $1 allocated (or 17% expended-see here, page 39).

In my experience, CDBG functions much as Steven Malanga of the Manhattan Institute states:

“Local officials quickly betrayed the CDBG’s ostensible antipoverty mission, using the grants to supply patronage jobs and set up nonprofits run by their allies….a Brookings Institution report noted that communities viewed the federal largesse as “free money.” One federal investigation found that nearly one-third of the operatives in Boston mayor Kevin White’s political machine worked for the city as CDBG coordinators” (“Let’s Kill the CDBG”, City-Journal, Autumn 2017).

Depreciation Creates Affordable Housing

The term “housing ladder” used by Husock is a misnomer.

The term refers to buying a cheap home in an older area and building up equity and then selling and moving up to a tier of higher priced housing as family income increases (e.g., moving up the ladder). Cheaper rental housing does not provide an upward ladder of social mobility from home equity loans, renovation or appreciation.

Moreover, the housing ladder concept should also not be confused with the term “neighborhood filtration.” Older housing “filters” down to first-time buyers.

In other words, all affordable housing by definition is older housing. Only in California is there a policy that lower income households are entitled to brand new, luxury housing by inclusionary housing policies and building new apartments with redevelopment funds.

Redevelopment as Demolisher of Affordable Housing

Further compounding this problem is the rampant redevelopment found in California where older housing districts are demolished for brand new, greater property-tax-generating commercial retail and hotel development.  But affordable housing units don’t even nearly keep up with demolitions. Only 20% of the increased property taxes generated go toward low-income replacement housing.

In 2011, Gov. Brown abolished redevelopment agencies during the 2009-2012 budget crisis. In 2017, Assembly Bill 1568 restored redevelopment for affordable housing using sales and use taxes in addition to property taxes.

The political Right objected to redevelopment mainly because of the use of eminent domain for private purposes.  The Left objected because it would end the purported supposedly reduce low-income housing, and along with it, political patronage jobs.

But neither objected to the goal of redevelopment in the first place: getting rid of “urban blight”; and along with it, market-produced housing affordability. And older homes that weren’t in a redevelopment district were eligible for CDBG low-interest rehabilitation loans and outright grants, again to reduce “blight”. “

Redevelopment and CDBG functions to build back up the property tax base lost from California Proposition 13 by effectively making older (affordable) housing stock unofficially a non-conforming use of property. Prop. 13 reduced the base property tax rate from 4% to 1%. Redevelopment is a sort of reverse Prop. 13.

A 1999 report, “Banking on Blight,” indicates a large proportion of the land area of cities in California are designated redevelopment project areas, notably the City of Long Beach with 54% or 26 square miles. A glance at a map of the redevelopment project areas in the Cities of San Jose in Silicon Valley and in working class Oakland shows a similar magnitude of the extent of redevelopment (see here and here).

Urban Sprawl Reduced to Crawl

With the demolition of thousands of blighted, older, but affordable, housing units in urban California by redevelopment, the only other housing option for first-time buyers is to find market affordable housing at the urban fringe, but California’s social engineers even deterred this.

In 2008, Gov. Schwarzenegger signed Senate Bill 375 – “Redesigning Communities to Reduce Greenhouse Gases”, as an anti-urban sprawl policy.  SB 375 would divert new development to cities as opposed to the urban fringe purportedly to reduce carbon footprints and promote “smart growth”.

Affordable Housing as a Social Problem

Tom Sowell has aptly stated “someone once defined a social problem as a situation in which the real world differs from the theories of intellectuals.” In the case of housing affordability, this would apply to both the Right and the Left’s solutions to the affordable housing crisis in California.

Ergo, if you want affordable housing, eliminate redevelopment and anti-urban sprawl transportation and housing policies; and zero-out the federal CDBG program, as Trump advocates.

Berkeley Officials Reject Plan to Fast-Track New Housing

HousingAs CalWatchdog reported July 2, the city of Cupertino’s decision to stop fighting a massive mall makeover project enabled by a far-reaching 2017 state law meant to promote more housing construction could someday be seen as a milestone in state planning.

Senate Bill 35 by Sen. Scott Weiner, D-San Francisco, requires cities that have not met their affordable housing requirements to approve projects that are properly zoned, pay union-scale wages to builders and have at least 10 percent of units in “affordable” ranges.

After months of objections from Cupertino elected officials and activists, in June, the city signed off on developer Sand Hill Property Company’s plan to convert the largely empty 58-acre Vallco Mall site to a huge multi-use project with 2,400 residential units, 400,000 square feet of retail space and 1.8 million square feet of office space

Given that 98 percent of cities have been found to have an inadequate supply of affordable housing, according to a state evaluation, the Cupertino precedent seemed potentially huge.

Two months later, new developments related to SB35 appear to point in the opposite direction.

Last week, Berkeley officials rejected a plan to use the law to fast-track approval of 260 apartments and 27,500 square feet of commercial space at 1900 4th Street just east of the Berkeley Marina despite evidence presented by developer Blake Griggs Properties that it was properly zoned and otherwise met SB35’s edicts.

City tactics in fighting project have familiar ring

The tactics that Berkeley is prepared to use mirrored the ways that construction projects have been fought in California for decades: raising a variety of legal objections that could cost developers millions of dollars because of delays, even if they have little or no validity or applicability.

Berkeley planning chief Timothy Burroughs said the project could not proceed because:

  • It would have been built on land designated as a historical landmark because of a Native American burial ground. As a city with its own charter government, it is given deference in protecting its history.
  •  It would have considerable low-income housing but not enough housing for those with very low incomes.
  •  It would have increased traffic in the area in ways not allowed by city laws.

The objections were of the sort that Weiner sought to bypass with SB35. This is why the developer warned of a lawsuit earlier in the summer after the city put up roadblocks to approval.

But in a surprising move reported last week by the San Jose Mercury-News, West Berkeley Investors – part of the group backing developer Blake Griggs Properties – has backed out of the project without explanation. The assumption of many is that it saw the hassles as outweighing the chances for success.

The Mercury-News also reported that a spokesman for Berkeley City Hall said officials would welcome it if developers chose to reactivate a previous application that had far fewer residential units – 135 – and slightly more commercial space – 33,000 square feet.

In his Sept. 4 letter rejecting the latest version of the project, the city planning chief emphasized the historical significance of the Native American burial ground. Why that significance would lose weight in planning decisions if a smaller project were being considered was not explained.

But Burroughs pushed back against the idea his city was hostile to adding housing stock. He said 910 housing units have been built since 2014, 525 are now being constructed and 1,070 are cleared and in the pipeline.

This article was originally published by CalWatchdog.com

UC Berkeley professor blames rent control for California’s housing crisis

UC BerkeleyKenneth Rosen, a UC Berkeley economist and real estate consultant, published a paper Wednesday titled The Case For Preserving Costa Hawkins, in hopes of swaying voters against Proposition 10.

Proposition 10, which will go before voters in November, would repeal the 1995 Costa-Hawkins Act, a state law that severely curtails rent control in California cities. For example, under Costa-Hawkins, only San Francisco apartments built before 1979 may be subject to rent control.

Passing Proposition 10 would not in and of itself create any new rent control housing, but it would allow cities to expand rent control stock for the first time in decades if they so choose.

Rosen, however, argues that turning the clock back to 1994 will stifle new housing and drain apartment stock. …

Click here to read the full article from SF Curbed

Elected Officials to Blame for California’s Homegrown Housing Problem

house-constructionWe see the headlines daily — California has an affordability problem when it comes to housing. People have to live further and further away from their jobs, and even a median-priced condo is out of reach for many. Since this affects so many of us, and since California now has about a fourth of the nation’s homeless population, compassionate people want to do something. But that something could make a bad situation even worse. As former U.S. Sen. Tom Coburn, R-Oklahoma, says, “the best way to make something expensive is for government to make it affordable.”

After emigrating from Jamaica as a child and settling in Florida, I came to California as soon as I could. Our amazing state — with its lack of humidity and flying bugs — has always been attractive to aspiring actors, creators and entrepreneurs, so a higher cost of living was expected as a down payment on living the California Dream. What’s happening now, however, is causing sleepless nights for many.

First, we need to understand how we ended up with this problem. California has lots of people willing to build, so how did we not keep up with the clear demand for so long? For years, the state has consistently added about half the housing needed to keep pace with the population. Our elected officials shoulder much of the blame, by constraining supply due to mandates and regulations. Now, of course, they’d like to be part of the solution. Central planning, however, has never worked, even though it’s been tried in myriad ways and in many different variations.

The first hurdle that politicians enacted was the California Environmental Quality Act. Instead of being used to address real environmental concerns and protect our unique topography, it’s often used as a cudgel to enact wage and other concessions from developers. Over a third of the lawsuits filed under CEQA have to do with housing. This, of course, adds costs and delays to development, and gives pause to anyone considering building in the state. …

Click here to read the full article from the Orange County Register

Families earning $117,000 now qualify as “low income” in California’s Bay Area

A report out this week from the Department of Housing and Urban Development finds the median price for a single-family home in the Bay Area is now $935,000. A family earning $117,000 now qualifies as “low income” in the region.

CBS News went to see California’s red-hot housing market with realtor Larry Gallegos. He showed us a house you would think he couldn’t give away. But Gallegos says the home, complete with leaks in the roof, sold for $1.23 million. The buyer beat out six competing offers, all above the asking price.

“It’s a little mind blowing, but it is the norm around here,” Gallegos said.

That norm is fueled by thousands of well-paid tech workers who have driven up the median price of a San Francisco house to $1.6 million dollars, the highest in the country. While housing prices are rising faster than incomes nationwide, nowhere is it more evident than in the Bay Area, where home values have soared a staggering 64 percent over the last five years. …

Click here to read the full article from CBS News

California’s solar-panel mandate for new homes will keep the cost of living unaffordable.

Solar panelsCalifornia, where a modest, burned-out home in San Jose just sold for nearly $1 million, well above its asking price, is in the throes of a housing-affordability crisis. The state’s latest response to the housing crunch: a mandate that builders install solar panels on every new home in the Golden State.

It’s tough to overstate the high cost of housing in California, even relative to the state’s high incomes. In San Jose, the average home costs 10.3 times the area’s median income, according to Demographia’s International Housing Affordability Survey. This high ratio is not due to some local bubble — it’s 9.4 in Los Angeles, 9.1 in San Francisco, and 8.4 in San Diego. Elsewhere in the country — even in relatively prosperous cities with high growth — housing is more affordable. In Columbus, Ohio, and in Atlanta, for instance, home prices average only about three times the median income. Even New York City, considered “severely unaffordable,” scores just 5.7.

Regulations that stifle building are a big part of the problem. Reason illustrated the absurdity of California’s building rules when it profiled a laundromat owner in San Francisco who has spent four years and $1 million trying to develop apartments on the site of his one-story, non-historic building in a city starving for new housing. It’s so tough to find an affordable place to live in San Francisco that people in their late thirties are living in dorms.

But beyond the zoning and regulatory barriers, mandates that raise prices are an underreported part of the housing price challenge in California. The New York Times estimates that the solar-panel requirement will add $8,000 – $12,000 to the cost of a home — close to the price of a year’s in-state tuition at UC Berkeley. One local chapter of Habitat for Humanity says that the charity will have to raise an additional $80,000 to $100,000 per year just to keep building the same number of homes. Advocates insist that solar power saves money in the long run, but if it’s such a great deal, why does California have to legislate it?

The state’s rationale for imposing the directive is, of course, climate change. But as New York Times climate reporter Brad Plumer tweeted, adding 10,000 new apartments in San Francisco would reduce carbon-dioxide emissions in the state by three times as much as the solar-panel mandate because urban apartment-dwellers use less energy than single-home occupants. California is already a green-friendly state. Building more housing that lets more people live in California, even at current energy-efficiency levels, would have a positive effect on emissions. The alternative is forcing people to move out of state and into more polluting jurisdictions.

State legislators made an attempt to expand housing availability with Senate Bill 827, which would have preempted local zoning rules by requiring cities to allow midrise construction near rail stations and major bus stops. The legislation should have pleased climate-change activists by facilitating the construction of new transit-oriented development and increasing density. But powerful environmental groups in California, including the Sierra Club, lined up against the bill, which failed in committee.

With its heavy-handed, top-down approach to zoning, SB 827 raised legitimate concerns about local control over land use—but the bill’s opponents block any plan that would materially increase housing supply in transit-accessible areas. California’s environmentalist-NIMBY axis has been highly effective in driving housing costs to unsustainable levels. The failure to build new housing in America’s most climate-friendly locales suggests that the underlying rationale for California’s rules is not climate, but exclusion.

Making the Housing Shortage Worse

Rent ControlWe have a severe housing shortage, and last week our mayor said that he’d help make matters worse.

If Eric Garcetti gets his way, rent control could be imposed on far more apartments in Los Angeles and throughout the state. That’d be great for the few folks lucky enough to get a rent-controlled unit. It’d be bad for everybody else.

That’s not a surprising statement. Studies have shown that. Let’s look at one of the latest.

A working paper published in January by the National Bureau of Economic Research examined the effect of a 1994 ballot initiative in San Francisco that slapped rent control on smaller buildings constructed before 1980. Three economists followed what happened to those buildings and compared their fate to similar buildings constructed after 1980.

So what happened? First, there was a reduction in the number of rent-controlled units as landlords decided to convert their buildings to condos or otherwise redevelop their properties. In fact, rent-controlled buildings were 10 percent more likely than the non-rent-controlled buildings to convert, “representing a substantial reduction in the supply of rental housing,” the report said.

Second, there was a 25 percent reduction in the number of renters living in rent-controlled units compared to 1994, largely because of “landlords demolishing their old housing and building new rental housing,” the study said. “New construction is exempt from rent control.”

So there was a drop in the number of rental units as well as a decrease in the number of tenants who enjoyed rent control. No surprise there.

In short, rent control makes matters worse, which pretty much every informed person knows with the apparent exception of Garcetti. What was a teeny bit more surprising was the working paper’s assertion that rent control increased gentrification as well as worsened income inequality in the city.

How so? One of the authors of the working paper, Rebecca Diamond, an assistant professor of economics at Stanford University, was quoted as saying that rent control “pushed landlords to supply owner-occupied housing and new housing – both of which are really the types of housing consumed by rich people,” she said.

“So we’re creating a policy that tells landlords, ‘It’s much more profitable to cater to high-income housing taste than low-income housing tastes.’”

In other words, rent control makes matters much worse.

What’s particularly alarming about last week’s news is that the current move to impose more rent control would make matters even worse than you might expect. That’s because the proposed statewide ballot initiative that would roll back the Costa-Hawkins Rental Control Act (the initiative which Garcetti last week called a news conference to endorse), would not only give cities the green light to allow rent control to be slapped on apartments built after 1978, but it would take the extra step of limiting the ability of landlords to raise rents after one tenant leaves. The way it works now is that when one tenant leaves a rent-controlled unit, the rent can immediately catch up to market rates for the incoming tenant. Rent increases are limited thereafter, until that tenant leaves.

That provision alone is a killer. It would mean landlords would be doomed to falling further and further behind market rates. That means more apartment buildings would not pencil out, and landlords would rush to empty out their buildings, scrape the ground and construct something new – something that’s not an apartment building. We’d see declines much greater than 25 percent in tenants enjoying rent control.

Look, the yearning to do something is understandable. After all, rents have popped up alarmingly and even folks with good incomes are being priced out of homes. But imposing more rent control would only choke supply and make matters much worse.

The real issue is supply. If we had more construction, the shortage would eventually disappear. But for that to happen, developers need to feel confident that they can build with the certainty that they can earn enough income to pay their mortgage and other bills and get a reasonable return. Right now, they can’t. And mayoral endorsements of rent control make matters worse.

ditor and publisher of the San Fernando Valley Business Journal.

This article was originally published by Fox and Hounds Daily