Governor Jerry Brown’s “by-right” housing proposal, which would have automatically approved certain housing developments that comply with local zoning, failed to pass in the legislature.
What It Means:
Most people in California understand that we have a housing shortage, and most people would like housing to cost less, particularly in the Bay Area and Los Angeles. But every reform proposal has powerful opponents, and thus far, no one has found a politically-viable way to change the system.
The housing shortage in California is a long-term problem that is being acutely felt right now. In coastal cities like San Francisco, the median home price is well over $1 million, which only 13 percent of the city’s households can afford . Low-income households are particularly vulnerable, with nearly 1.7 million of the state’s low-income households paying more than 50 percent of their annual income toward housing costs .
With construction costs for all development continuing to increase, the cost to build subsidized affordable housing is skyrocketing. The total development cost for an affordable unit is typically around $500,000 and has reached as high as $700,000. Further, middle-income households can’t afford housing at market prices yet don’t qualify for most affordable housing programs.
It’s imperative that the state, the federal and local governments continue to subsidize affordable housing for low-income households. But we also need to address the market in order to address the needs of the middle. We will never have enough funding to build enough affordable housing for all who qualify; most people in California will be getting their housing in the market .
In response, Governor Jerry Brown proposed a budget trailer bill in May that would have automatically approved multifamily housing projects that fit within the local zoning. Under the proposal, eligible housing proposals would be approved “by right” meaning that they would not be subject to case-by-case local approvals or review under the California Environmental Quality Act (CEQA). The process for approving eligible projects would be faster and the outcomes would be more certain, leading to more housing production at a lower cost. In addition, the Governor proposed $400 million in state spending on affordable housing, contingent on the by-right proposal.
Groups like SPUR saw the proposal as a win-win if a deal were struck that both increased affordable housing spending and made multifamily housing (both affordable and market-rate) faster and less expensive to produce but many others felt threatened by the bill.
The building trades unions did not like the proposal because they rely on CEQA lawsuits to get developers to use union contractors. Environmental groups were concerned that the proposal would unintentionally make it easier to build sprawl. The League of California Cities and many of its member cities were opposed to the loss of any local control (though most of the big city mayors in the state formally expressed their support for the proposal). Housing groups were split, with some stridently opposed to neighbors/communities “losing their voice” (i.e. the use of CEQA to stop projects) and with others supportive of the concept if the bill were amended.
Ultimately, labor and environmental groups that had been negotiating with state leadership decided to walk away from the discussions, and $400 million, before the end of the legislative session.
The need for state housing reform is as pressing as it ever was. We observe that the parts of the country that have made progress on these issues have nearly always done so through state reform rather than relying on bottom-up city-led change. This includes the regional tax-sharing system in Minneapolis and the growth management system in Portland – two ideas that SPUR has been interested in for a long time.
Another state model may hold promise: In Massachusetts, Chapter 40B created a state appeals body that has the power to approve housing developments in communities that have not achieved minimum levels of affordable housing. Earlier this year, University of California, Berkeley’s Terner Center published a white paper analyzing the best way to set up a “California 40B” that would reform the process and allow for a process to override local decisions in some cases. There are many other reform proposals that would make it easier, faster, cheaper, and less risky to build housing. What remains to be seen is if there is a compromise set of ideas that can navigate through the various types of opposition to gain political acceptance.
 Truong, Kevin, "Only 13 Percent of Households in San Francisco Can Afford a Median Priced Home." San Francisco Business Times. August 16, 2016.
 Legislative Analyst's Office's LAO Report, "Perspectives on Helping Low-Income Californians Afford Housing." February 9, 2016.
 Several policy reports and academic studies released this year have shined a light on the role that zoning and land use regulation have played in slowing the production of housing and making it more expensive, particularly in high-cost areas like the Bay Area. The White House’s Housing Development Toolkit and the Bay Area Council Economic Institute’s Solving the Housing Affordability Crisis are but two of those.