After Decades of Red Tape, Some Developers Seeing Their Projects Through

Building homes in California requires a significant investment of time, money, and other resources, leading many developers to avoid construction projects. But in northwest Los Angeles County, one builder has stayed the course since 1994. On completion in 2021, the 15,000-acre Newhall Ranch — billed as one of the world’s first large-scale planned communities — will feature roughly 22,000 homes that follow the curves of the Santa Clara River in the Santa Clarita Valley. Owned by Orange County’s FivePoint Communities, Newhall Ranch is expected “to be ‘net-zero,’ meaning no greenhouse gas emissions, by implementing several mitigation efforts including solar panels and open space,” according to local radio reports. Some developers and environmentalists regard the development as a “new benchmark in the fight against climate change.” Homes will be outfitted with sun-driven power and charging stations for electric vehicles, and FivePoint plans to offer subsidies to “residents, schools, and bus services” to encourage them to buy zero-emission vehicles.

Though the developer tirelessly met environmentalist demands and generated “green” credibility, the project has endured more than a quarter-century of roadblocks and red tape, courtesy of California’s mammoth bureaucracy — including “lawsuit after lawsuit after lawsuit,” says Wendy Devine, who oversees a website focused on Newhall Ranch news. The litigation primarily addressed environmental issues, as is typical for California, where the California Environmental Quality Act (CEQA) has delayed housing development, reduced it in scope and size, and even shut it down. The developer produced more than109,000 pages of documents, navigated the review of 25 government agencies, appeared at 21 public hearings, and attended over 700 meetings. Finally, the project broke ground last year.

Newhall Ranch’s saga makes one wonder how anything gets built in California. In San Francisco, Bob Tillman waited six years and spent $1.2 million in legal fees to obtain approval for a 75-unit apartment complex on his own property. As early as 2013, “Tillman thought he was good to go,” writes Hoover Institution scholar Lee Ohanian. “His location was zoned for multifamily residential housing. He was not displacing any existing residents, because he was converting a commercial enterprise into a residential building. And because his proposed development was high-density housing, the project qualified for streamlined approval.” Yet everything went wrong anyway. The city planning agency’s powerful political appointees turned “what should have been a pro forma approval process” into a nightmare. Last fall, Tillman finally saw daylight, after deputy city attorneys met with the San Francisco Planning Commission to discuss the lawsuit that Tillman had brought against the city.

What happened to Newhall Ranch and Tillman is common across California. On occasion, entire projects get abandoned because the cost of delays and other government-imposed expenses leave little or no profit for developers. While several impediments bottle up home construction, none is enforced more severely than CEQA, signed into law by then-governor Ronald Reagan in 1970. Housing, notes the law firm Knight & Holland, is “the single-largest target of CEQA lawsuits.”

It’s not just hard-core environmentalists who use CEQA to block development. CEQA is also a favored tool of businesses that use it to try to handicap competition (the Parking Spot sued LAX a few years ago over plans to connect a rail line to the airport, for instance); developers who attempt to hinder rival projects; NIMBYs who don’t want anything new built near them; and unions that try to force developers to exclude nonunion workers from construction projects. Yet while CEQA deters housing construction, the policymakers manage to carve out exemptions or secure fast-track approvals for projects important to them, such as basketball arenas and football stadiums.

One would think that the Golden State would be an attractive market for homebuilders, due to its critical housing shortage of as many as 4 million units. California housing should be the next gold rush. Instead, today’s California rush is made up of residents fleeing the state because they can’t find affordable housing.

Kerry Jackson is a fellow with the Center for California Reform at the Pacific Research Institute. 

Who Killed Zoning Reform in California?

For a moment, it seemed like California policymakers were ready to pass legislation capable of putting a serious dent in the state’s housing-affordability crisis. But in May, the state senate shelved Senate Bill 50, which would have eased restrictions on housing density along public-transit corridors and in job-rich areas. SB 50’s sponsors had built a broad bipartisan coalition of support, and polling indicated that a majority of Californians supported key provisions. State Senator Anthony Portantino, chairman of the appropriations committee, took the steps that blocked the bill, but, according to Liam Dillon of the Los Angeles Times, suburban homeowners were the real force behind SB 50’s demise. Portantino, after all, represents wealthy Los Angeles suburbs like La Cañada Flintridge, which haven’t built a single apartment in decades.

For all the disturbing media coverage of homelessness and displacement in the Bay Area and Los Angeles, the housing crisis has mostly been a boon for California homeowners. The planning-induced scarcity—coupled with soaring tech-sector salaries and a steady flow of billion-dollar IPOs—has sent house values skyrocketing. Even shacks now command bids well north of seven figures. Houses that might have sold for $40,000 in the 1970s can easily go for $2.5 million today.

Compounding the trouble, California is constitutionally unable to tax much of this wealth. In most states, rising house values would mean higher property taxes. But California’s Proposition 13, a 1978 ballot initiative that sets real estate taxes at 1 percent of a property’s sale price and limits annual increases to 2 percent per year, means that property-tax revenues don’t rise proportionately with home values. With house prices increasing many multiples since 1978, Prop 13 has produced one of America’s most arbitrary state tax systems. Its terms reset only when a home is sold or rebuilt, so it’s common for neighbors in identical houses to pay dramatically different tax bills. Property owners have no incentive to sell, downsize, or host additional housing units as costs rise.

California homeowners’ opposition to new housing construction is entirely consistent with the behavior predicted by urban economist William Fischel’s “home-voter hypothesis.” Fischel’s work suggests that homeowners—or “home voters”—will make use of the state and local political process, particularly zoning, to prevent any development that might devalue their homes, which are usually a household’s primary source of wealth. For instance, if a multifamily building is proposed in a municipality otherwise characterized by single-family housing, we may expect a homeowner to resist the development on the premise that an influx of new families could overburden public schools or worsen traffic congestion, or express fears that new rental housing might threaten “community character”—thereby lowering home values. As SB 50 would greatly enhance the freedom of property owners to build multi-family housing, it is easy to see why it would be unpopular in low-density suburbs like La Cañada Flintridge.  

Short of repealing Proposition 13, which is unlikely, one way around the home-voter quandary would be to weaken the bond between home values and school quality. If families were freer to pursue higher-quality schooling options untethered from their place of residence, we would expect to see fewer bidding wars for homes in top-tier school districts, leaving home voters less defensive about the risk of newcomers. School vouchers, charter schools, and an open-enrollment policy that lets students attend public schools outside their district of residence could decouple housing costs from school districts. The state could achieve similar results if its selective public universities placed greater weight on the economic integration of an applicant’s high school in their admissions criteria, giving homeowners in prestigious school districts a reason to welcome new multifamily housing that improves the “adversity scores” of local schools.

At the federal level, phasing out hefty tax subsidies for homeowners would also reduce resistance to housing growth in supply-constrained California. Fischel suggests eliminating the preferential treatment of capital gains on sale of a primary residence, which allows for the exemption of hundreds of thousands of dollars of profit. This would reduce the benefit that homeowners derive from exclusionary zoning, while discouraging the unhealthy practice of concentrating wealth in housing, which, again, drives excessive risk-aversion to changes in local land use.

Eliminating the state and local tax deduction (SALT) would work to similar effect. The Tax Cuts and Jobs Act of 2017 took a positive step in restraining the SALT deduction, but full elimination would further reduce the benefits of restrictive zoning practices by ensuring that homeowners pay more of their property taxes as home values rise.

Beyond education and tax policy, weakening home-voter impulses could also require some concessions on local control. Christopher Elmendorf proposes a compact between state and local governments in which the state would set quotas for housing growth, but the municipalities would choose their own zoning reforms to meet them. Once a municipal plan gets certified by the state, it would supersede the adoption or enforcement of any contrary zoning provisions. Any municipality that fails to comply with its own plan would face financial penalties. Some affluent suburbs may choose to opt for penalties over compliance, but the option of paying for exclusivity might prevent richer communities from blocking passage of the proposal.

In the end, SB 50 is no more dead than its predecessor bill, SB 827, which similarly sought to permit multifamily housing near transit lines. Neither the coalition built by the bill’s sponsor, State Senator Scott Weiner, nor the crisis that it aims to address are going away. But if housing reformers are serious about addressing the root causes of the home-voter impulse, they’ll need to plan for contingencies. SB 50’s foes are already rallying to introduce a ballot initiative aimed at entrenching local control of land use in the state constitution—an amendment that would all-but ensure that California’s housing crisis becomes permanent.

Brandon Fuller is Deputy Director of New York University’s Marron Institute of Urban ManagementNolan Gray is a city planner and a contributor to Market Urbanism.

This article was originally published by City Journal Online

What’s Blocking Housing Reform? Special Interests or Public Opposition?

The belief that California has a profound housing crisis took hold in the state’s media and political establishments in recent years after Census Bureau statistics showed the Golden State had the highest effective rate of poverty once cost of living was included.

The view was amplified by stories about four-hour commutes forced by housing costs and about shocking numbers of poor college students who struggled to pay for food.

That’s why the decision last week by state Senate Appropriations Chairman Anthony Portantino, D-La Cañada Flintridge, to kill Senate Bill 50 – the latest attempt to spur housing construction by limiting local control of approvals 
– came as a surprise to many. That included the bill’s sponsor, Sen. Scott Wiener, D-San Francisco. His push to ease rules to allow four-to-five-story apartment buildings near public transit centers and to allow construction of such units in many zones previously reserved for single-family homes had won support from not just developers but construction labor unions, several large-city Democratic mayors and some activist groups. Many were skeptics of Wiener’s and Gov. Jerry Brown’s previous attempts to limit local control.

Stories about Portantino’s decision focused on the fact that leaders of cities in his district, starting with Pasadena, had been vociferous opponents of Senate Bill 50. Reports also focused on the formidable influence of environmental groups, which prefer strict zoning rules to give them more clout to block development.

These arguments are common. In August 2016, when Brown’s attempt to sharply streamline the approval process for housing projects died in the Legislature, Shamus Roller, executive director of Housing California, blasted “the political gamesmanship of powerful interests.”

Californians ‘must be convinced of benefits’ of adding housing

But another view is that then-state Legislative Analyst Mac Taylor knew what he was talking about in March 2017 when he issued a report on the failure of local governments to meet housing mandates that said major change was unlikely “unless Californians are convinced of the benefits of more home building.” Instead of seeing the failure of housing reforms as a result of special-interest machinations, Taylor argued that elected leaders who backed such measures hadn’t cultivated the public support necessary to enact major changes.

Taylor’s thesis was supported by a USC Dornsife/Los Angeles Times poll of Californians released in October that found little belief that the housing crisis was due to a lack of building. It was the sixth-most cited reason, falling far behind the top two: the lack of rent control in much of the state and inadequate “affordable housing” programs. Two-thirds of those surveyed supported local control of housing approvals even if cities or counties weren’t meeting state mandates for new housing construction.

Still, Wiener said he wasn’t daunted by Portantino’s decision. He said he would bring another housing reform measure to the state Senate in 2020. The former San Francisco supervisor, a Harvard law graduate, also said he thought Senate Bill 50 had a chance of being resurrected this summer, even though appropriation chairs of the Senate and Assembly have a long history of making their decisions stick.

“We’re either serious about solving this crisis, or we aren’t,” he told reporters in Sacramento last week. “At some point, we will need to make the hard political choices necessary for California to have a bright housing future.”

This article was originally published by

Guess What? California Needs More Housing

The major findings of a recently released report came as no surprise to most of us:  California needs more housing – lots of it. This, by the way, comes on the heels of enactment of a package of bills to, presumably, solve the problem.  That’s what we were told, anyway, by state legislators after they passed the legislation – recently and two years ago.

Yet, despite these laws and new funding to boost housing construction, the report by the legislatively created “California Housing Partnership” (the Partnership) says the state still needs much more, including 1.4 million rental units affordable to lower-income households.

The purpose of the study was to examine the extent to which poor households in California are cost-burdened – spending more than half their incomes on rent.  Naturally, the study found that of the state’s more than two million very low-income renter households – roughly two-thirds – are severely cost burdened, meaning they need to spend less on housing.  But, the study reached the same conclusion that’s true for all of California: we need to increase supply. Quickly.

That, says the study, can’t be easily accomplished in this day and age – with so many local obstacles.  Although the report calls for the state to give $1 billion annually to cities and counties to fund more housing and more tax breaks to help low-income families, this state spending would almost surely be squandered.  Land costs are through the roof, zoning restrictions are pervasive, fees have gotten out of control and NIMBY groups – backed by an insidious and ever-present California Environmental Quality Act (CEQA) – can be counted on, lurking around every corner, to oppose each new project.

The housing is still desperately needed, though – something that, by now, should be understood by every state lawmaker.  Besides being smart people, a sizeable portion of legislators are – according to a recent survey – landlords themselves. The survey showed 30 of them – 25 percent of both houses – own at least one unit of rental housing.  So, supply and affordability – and leaving housing markets unfettered by frivolous rules – should be well-known to most lawmakers.

Alas, this year, again, that’s not the case.  Instead of working in a concerted, cooperative way to help free up housing markets, policy committees are becoming bogged down by dozens of housing bills that aren’t helpful at all.  Some of those bills were outlined in this space recently but the really bad ones – involving rental housing – bear repeating:

  • AB 36 (Bloom) – would change state law to allow rents to be capped on properties ten years or older.  Existing law currently prohibits government-imposed controls on properties built after February, 1995.
  • AB 1110 (Friedman) – would require prior notice (90-day to 120-day) to residents for rent increases of 10 percent or more.
  • AB 1481 (Bonta) – would prohibit a landlord from evicting a resident without cause.  Currently, non-payment of rent can end a tenancy.
  • AB 1482 (Chiu) – would create a statewide limit for rent increases – right now pegged at the Consumer Price Index (CPI).
  • AB 1697 (Grayson) – another “just cause” impediment when the resident has occupied the property for 12 months or longer.
  • SB 529 (Durazo) – would declare that residents have the right to form, join, and participate in the activities of a tenant association, and withhold rent for any purpose they deem needed.

A dozen or so of introduced bills affecting zoning and land use are just as bad.  Indeed, these are just a few of the measures making up the left-leaning California legislature’s “package” of this year’s legislation designed to ease the state’s housing crisis.  Rather than displaying their intelligence or documented “on the job” experience, with these bills state lawmakers reveal that more government strictures and controls imposed on housing markets makes for good housing policy.  They don’t.

It seems like all the experts, pundits and academicians all agree that California needs vastly more housing.  If only our state legislators could acknowledge this and act accordingly.

Timothy L. Coyle is a consultant specializing in housing issues.

This article was originally published by Fox and Hounds Daily

Desperation Growing in Bay Area’s Housing Market

Fears that heavy housing costs could undercut Silicon Valley and the Bay Area’s economy have grown steadily in recent years as gains in wages have been outstripped by soaring rents and home prices.

Now a poll of 1,568 registered voters in the region done on behalf of the Silicon Valley Leadership Group and Bay Area News Group paints one of the starkest pictures yet of public dissatisfaction.

Those polled were nine times as likely to say life in the Bay Area and Silicon Valley had gotten worse over the past five years than to say it had gotten better. Forty-four percent of respondents said they wanted to move out of the region because of housing costs, bad traffic and declining quality of life; 6 percent intended to leave in the next year. African-Americans and Latinos were those most likely to want to move elsewhere.

But even 64 percent of homeowners – normally much more content than others in surveys on life satisfaction – said their lives had gotten worse.

The results produced yet another warning from the Silicon Valley Leadership Group, which has cautioned for years that the region will struggle to attract workers for tech and blue-collar jobs alike unless housing costs stop spiraling upward. The group’s CEO, Carl Guardino, told the San Jose Mercury-News that “not working at our weaknesses will come at our own peril.”

School districts launch own projects

Most of the cities in the region haven’t come close to meeting state goals for either affordable or market-rate housing. Recent new state laws meant to spur more housing construction have yet to pay off.

Meanwhile, school districts in and near San Francisco and Silicon Valley are increasingly impatient with the status quo and open to new approaches. Three districts which struggle to keep teachers from leaving for cheaper communities are going into the housing business to ensure teachers have affordable rents.

In Mountain View, the city plans to meet its state affordable-housing mandates by working with Los Gatos-based developer FortBay to build a 144-unit subsidized apartment building for use by Whisman School District teachers and other employees.

The Whisman district’s board backed a $56 million agreement that commits the district to lease the building for at least 55 years. The project could be finished by the end of 2021, depending on the pace of city approvals and other factors. Long-term funding options include bonds or certificates of participation (bond-like measures that don’t require voter approval).

District Superintendent Ayinde Rudolph has also voiced the hope that substantial gifts from philanthropic groups could reduce the cost to Whisman.

In Daly City, the Jefferson Union High School District is using a $33 million voter-approved bond to build 116 apartments for teachers and other employers.

The Palo Alto Unified School District is evaluating how to fund a 120-unit project for its employees.

Legislation signed by Gov. Jerry Brown in 2016 allows the districts to give housing preferences to their employees. It also gives them access to state and federal low-income housing credits.

Can districts afford housing subsidies?

A recent UC Berkeley study of teacher housing issues in Berkeley Unified showed strong support from employees for a similar approach in their district. More than half reported difficulty paying rent.

But to date, no study has examined the long-term financial feasibility of having districts provide subsidized housing, as is contemplated by the three districts pursuing construction plans.

Employee compensation already consumes 85 percent or more of most school districts’ general fund budgets. With districts’ pension contribution rates more than doubling from 2014 to 2020 as part of the bailout of the California State Teachers’ Retirement System, dozens of districts are pleading poverty.

This article was originally published by

Grand Bargains To Make California Affordable

new houseThe good life in California is out of reach to ordinary people. The reason for that is simple: homes cost too much, energy costs too much, water costs too much, and transportation infrastructure is inadequate. In each of these critical categories, however, grand bargains are possible that would bring California’s cost of living back down to earth.

Unaffordable housing is the most obvious, talked about problem. The solutions being considered in Sacramento are either inadequate or flawed. The most significant proposal currently being considered in the state legislature is SB 50, which would require cities and counties to allow apartment building redevelopment in any place that is either within a half-mile of a rail transit station, within a quarter-mile of a “high-frequency bus stop,” or within a “job-rich” neighborhood. SB 50 would also remove the requirement for developers to provide adequate parking.

It is possible that SB 50 will pass. When it does, developers will be able to purchase homes in qualifying residential neighborhoods, demolish them, and construct apartment buildings up to 55 feet in height.

There are a lot of things to criticize about SB 50, most notably the fact that it overrides local control of these zoning decisions. More to the point, there is the disruptive impact to residents who invested their lifetime earnings into paying off a mortgage to own a home in a spacious, quiet neighborhood, who will see that ambience destroyed. Not only should these residents be able to rely on the zoning laws that were in place when they purchased their homes, but it is likely they cannot afford to move. If they sell, they will have to pay taxes on any profit over $500K, and once they’ve moved, they will no longer have California’s property tax protections for long-time property owners. Fixed income retirees will be harmed the most by SB 50.

Not everything SB 50’s opponents bring up is necessarily valid, however. The accusation that SB 50 will just cause more gentrification is based on cases where new high rise developments were made in the heart of downtown areas, on some of the most expensive real estate on earth. Of course those developments will only attract wealthy buyers. But whenever new housing units are put on the market, basic laws of supply and demand still apply. The wealthy buyers who choose these ultra expensive new units will not be purchasing the alternatives. Whenever more homes are built, then up and down the value chain, from exclusive penthouses to trailer parks, buyers have more choices.

The key factor in reducing housing prices in California depends on increasing the supply of homes. SB 50 recognizes this, but only addresses half the problem. SB 50 increases the density of cities, but it doesn’t touch the other fundamental problem, which is the need to expand the footprint of cities. Because of this, it is unbalanced, and as such, it is going to cause far more havoc on existing neighborhoods than would otherwise be necessary. And it won’t fix the problem.

No realistic assessment of housing policies, or the history of urbanization, can fail to acknowledge that as populations increase, existing neighborhoods are disrupted. Increasing housing density in the urban core as more people arrive is inevitable. But at the same time, outlying suburbs must be allowed to expand.

There is Plenty of Land in California for New Homes

Here is where the fundamental assumptions of California’s political elites are at odds with history and at odds with the natural preferences of millions of ordinary Californians. By forcing development into urban service boundaries, not only does it become far more difficult to create an adequate supply of new homes, but millions of people who want to raise families in detached single family dwellings with yards are denied that opportunity.

The justifications for denying urban expansion are not beyond debate. First of all, there is no shortage of land in California, which is only five percent urbanized. Entire new cities can spring up along the I-5 and Highway 101 corridors, along vast stretches of mostly empty land stretching over 500 miles from north to south. Basic facts contradict the arguments for “smart growth.”

Encompassing 164,000 square miles, California is only 5 percent urbanized. According to the American Farmland Trust, California has 25,000 square miles of grazing land (15 percent), 28,000 square miles of non-irrigated cropland (17 percent), and 14,000 square miles of irrigated cropland (9 percent). The rest, 54 percent, is forest, oak woodland, desert, and other open space.The above chart depicts three urban growth scenarios, all of them assuming California experiences a net population increase of 10 million, and that all new residents on average live three people to a household (the current average in California is 2.96 occupants per household). For each scenario, the additional square miles of urban land are calculated.

As the chart shows, adding 10 million new residents under the “low” density scenario would only use up 3.2 percent of California’s land. There is no reason why any of this growth has to occur on irrigated cropland. For example, if all the growth were concentrated onto grazing land—much which is being taken out of production anyway, it would only consume 21 percent of it. If all the growth were to fall onto non-irrigated cropland, which is not prime agricultural land, it would only use up 19 percent of that. Much growth, of course, could be in the 58 percent of California not used either for farming or ranching.

The grand bargain? Streamline the process for reasonable urban densification but mitigate the impact (and enhance the benefit) by also streamlining the process for urban expansion onto open land.

Competitive Development of Enabling Infrastructure

Policymakers might also strike grand bargains in the areas of water, energy and transportation, all critical to making and keeping California affordable as the population grows. In all three areas, not only are policy solutions available, but the array of solutions increases every decade as new technologies become available.

Creating Abundant, Affordable Water

The following chart depicts several projects that could be funded through a combination of revenue bonds – to attract private financing, and general obligation bonds – to reduce costs to ratepayers. While these projects are expensive, they are well within the capacity of California’s economy to support, and if constructed, they would guarantee consumers affordable water abundance for several decades, possibly forever. And it is important to note, these are California cost estimates. With appropriate reforms to provide relief from litigation and overregulation, these costs could be dramatically reduced. The capital costs for desalination plants in Israel, for example, per unit of capacity, came in at one-sixth what the costs were for the Carlsbad plant in San Diego.

For water, as with everything else that matters, compromise on a grand scale is necessary to negotiate a grand bargain. Environmentalists would have to accept a few more reservoirs and desalination plants in exchange for plentiful water allocations to threatened ecosystems. Farmers would have to pay more for water in exchange for undiminished quantities. While private financing and revenue bonds could cover much of the expense, taxpayers would bear the burden of some new debt – but in exchange for permanent access to affordable, secure, and most abundant water.

Creating Abundant, Affordable Energy

It is difficult to imagine how any state, or nation, could do worse than California’s done when it comes to providing electricity to its residents. With that ingratiating introduction to the topic, here’s why: Renewable energy has to be priced based on providing a 24 hour, 12 months per year, uninterrupted supply. As it is, renewable energy providers are permitted to sell their electrons based on their direct costs, and utilities are required to purchase it. Meanwhile, when the sun goes down or the wind dies down, utilities have to find power elsewhere. This is extremely expensive, because these backup plants cannot produce continuous power, meaning their construction costs and fixed overhead costs have to be priced into part-time operation.

Michael Shellenberger, an energy expert and advocate for nuclear power with impeccable environmentalist credentials, recently published a blistering takedown of renewable energy in Forbes. Entitled “Why Renewables Advocates Protect Fossil Fuel Interests, Not The Climate,” the article provides revealing details about how fossil fuel corporations are pouring money into environmentalist nonprofits that advocate renewables. And why not? By stigmatizing nuclear power into oblivion, the only reliable way to balance intermittent flows of renewable energy is to build more natural gas fueled power plants.

The solution to providing California with abundant energy is to retrofit, expand and recommission existing nuclear power complexes and build new ones, along with building more natural gas power plants. The grand bargain? Environmentalists get cleaner air, but have to accept nuclear power. Special interests that advocate renewables can still sell their products, but have to price in the costs for them to cover their nightly and seasonal production deficits. Fossil fuel interests can continue to operate, but have to compete with nuclear power. And California’s power consumers will see prices in a competitive market come back down to national standards.

Creating Effective Transportation for the 21st Century

California’s roads are poorly maintained and inadequate. Meanwhile, the most egregious waste of public funds perhaps in history, the “bullet train,” continues to hang on to life as a truncated boondoggle still planned to connect Merced to Bakersfield. Explaining the folly of high speed rail in California may also explain the benefits of alternative solutions.

Within a few decades, self-driving cars, some owned for personal use, others privately owned but serving the public, will zoom along smart hyperlanes at speeds well in excess of 100 miles per hour. They will convoy with each other, running close together, using linked navigation systems, to facilitate far more throughput per lane mile than today’s freeways. Overhead, within a few decades, electric drones will shuttle people to and from their chosen destinations at speeds well in excess of 200 miles per hour. And far overhead, at around 50,000 feet, supersonic planes , electric VTOL/turbojet hybrids, will fly at speeds well in excess of 1,000 miles per hour.

This is the future of transportation in California, a future that demands upgraded roads and new modes of FAA administered airspace. As for rail, upgrading existing rail might have tremendous practical value. But why take a bullet train, when within a decade or two you’ll be able to dial up an aerial Uber on your cell phone, and at speeds exceeding the most optimistic HSR projections, fly from any rooftop in San Francisco to any rooftop in Los Angeles?

A Completely New Mentality is Needed for 21st Century Development

The good life can be recaptured for all Californians. The weather’s still great. The land is still beautiful and bountiful. The economy remains diverse and resilient. But California’s current policies have stifled innovation and created artificial scarcity of literally every primary necessity – not just housing, but water, energy and transportation. Each year, to comply with legislative mandates, government agencies and private developers alike spend billions of dollars to pay attorneys, consultants and bureaucrats, instead of paying engineers and heavy equipment operators to actually build things. The innovation that persists despite California’s unwelcoming policy environment is inspiring.

California’s policymakers have adhered relentlessly to a philosophy of limits. Less water consumption. Less energy use. Urban containment. Densification. Fewer cars and more mass transit. But it isn’t working. It isn’t working because California has the highest cost of living in the nation. Using less water and energy never rewards consumers, because the water and energy never were the primary cost within their utility bills – the cost of the infrastructure and overhead is always the primary cost. And nearly all these policies – high speed rail is the perfect example – diminish if not ignore potential technology breakthroughs on the horizon.

Within the next few decades, there will be modular, plug-and-play desalination units that coastal municipalities can put offshore to supply abundant water to consumers. In turn, these desalination units can be powered by modular, safe, plug-and-play nuclear reactors, scaled to whatever size is required, and nearly maintenance free. It doesn’t end there. Within the next fifty years or so, energy will be beamed from orbiting solar power stations to earth-based receivers to deliver uninterrupted electricity. We’re also probably less than fifty years from having commercial, scalable fusion power.

A completely new mentality is required, incorporating a vision of abundance instead of scarcity that encompasses every vital area of resource consumption. A completely different approach that could cost less than what it might cost to fully implement scarcity mandates. An approach that would improve the quality of life for all Californians. Without abandoning but merely scaling back the ambition of new conservation and efficiency mandates, embrace supply oriented solutions as well.

These are the grand bargains that would make California affordable again.

This article originally appeared on the website California Globe.

A First Look at the Governor’s Housing Budget

house-constructionDuring his campaign for Chief Executive of California, then-candidate and now Governor Newsom promised three and a half million new housing units would be built in the state by 2025. He promised a majority of those units would be affordable to lower-income households, as well. He also promised he would make it profoundly easier to get those housing units approved for construction. Governor Newsom knows it’s now time to deliver on those promises.

With the release in January of his Fiscal Year 2019-2020 Budget, the Governor is signaling he’s going to at least try. He’s still sticking to the three-and-one-half- million-unit goal (though many are disputing that possibility), he still wants to help lower-income families, although he proposes increasing assistance to moderate-income households, as well. And, his budget appears to reflect interest in helping local governments approve housing faster.

But, the Governor’s housing proposals for the next fiscal year fall short of meeting the state’s needs. An analysis of the proposed budget – summarized here with a little help from the Legislative Analyst’s Office (LAO) – shows how despite aiming at the real problem with housing production in California it punts the ball and intentionally or not misleads with the data and definitions it presents.

For example, Governor Newsom during the campaign and afterward accurately pinpointed the main source of why California so woefully under-produces housing: he rightly concluded that all power to okay a housing development – vast and prodigious – rests with local government. Yet, in an apparent attempt to be persuasive, the Governor goes after localities with kid gloves – litigation and a modest funding award. He knows better. Lawsuits take precious time and cost a lot of money. And, they simply enrich lawyers. Moreover, $3 million in planning grants to the state’s major cities and $7 million more if they build new housing is both wasteful and mere pittance when it comes to rewarding them.

In addition to its timidity, the Governor’s budget is misleading in its portrayal of increasing state benefits to higher-income persons. Example #1 is the suggestion that a revised state low-income housing tax credit will now “target households with relatively higher incomes” – allowing beneficiary incomes to rise to laughably higher levels – to 80 percent of median – then pretends that a mere $200 million boost in the state program will lead to the ability to “target households with relatively higher incomes”. In truth, the state credit program rarely operates without the much richer federal credit which, for competitive reasons, rarely assists households with incomes above 60 percent of median.

Example #2 comes from the Governor’s proposal to add $500 million in authority to the existing CalHFA program which lends money to developers for building housing affordable to lower and moderate-income families (50 percent of area median to 120 percent) – a very good thing. But, the program will not assist middle-income families (up to 150 percent of median), as the Governor claims.

A bold budget, which reflects the high priority that the Governor has made housing – and which will give him a good head start in building those three and a half million units in six years – starts with rich, meaningful incentives to local governments. “Plan and zone for your housing need for the year and get a sizeable cash reward” should be the message from the state to local governments everywhere. Instead of the locals getting $10 million – much of which goes to re-inventing the wheel – a true housing budget would allocate ten times that amount or more to them for, say, a variety of infrastructure – not just road repair. Indeed, $100 million to $200 million apiece to fund their priorities ought to get the attention of most localities.

The Governor shouldn’t be shy about defending the limits of how far state funding should go, either. He doesn’t have to worry about the households earning more than the so-called moderate-income tranche (120 percent of median income). He just needs to uphold his pledge to truly streamline the local project-approval process. If the Governor sticks to his guns and does that, he can be assured that the market-rate developers will take care of the rest.

This first look at his budget for Fiscal Year 2019-2020 examines only what the Governor has proposed. Subsequent analyses will be made and published in this space before it is due in its final form, June 30, 2019. But, his current spending plan makes a genuine effort to treat California’s housing crisis after it appropriately highlights the substantial need – particularly among lower-income households and, to a lesser extent, the dislocation of a million or so middle-income families that pay more than 30 percent of their income for housing (the average is 26 percent).

In so many words, it’s clear the Governor genuinely wants more housing for California and he remains steadfast in maintaining getting it as a high public-policy priority. But, there are ample reasons to be doubtful. First, his budget could be a more dramatic set of proposals. That it’s not should signal his Department of Finance (DOF) won’t let him – DOF never liked housing much.

Second, at this point it looks like lawmakers don’t like the impact the proposals may have on local governments – they want him to back down somewhat. And, early indications are that it’s the Governor who will blink first.

onsultant specializing in housing issues.

This article was originally published by Fox and Hounds Daily

Green New Deal Will Have Destructive Effect on Housing Market“The world is going to end in 12 years if we don’t address climate change.”  That’s what congressional newcomer Alexandria Ocasio-Cortez (D-NY) is saying about the latest existential threat to the planet (and the well-being of its inhabitants) – best known as global warming.  To back up her claims she recently presented a “Green New Deal” – a modern-day, environmentally friendly proxy for FDR’s Depression-era war on unemployment and poverty.  Yet, it’s nothing less than a plan to transform the U.S. society and economy as we know them.

The Green New Deal (“the Plan”) has sparked a nationwide controversy.  Maybe it’s for the clever “green” tapestry Ocasio-Cortez has hung on this mix of high-school-like platitudes and warmed-over Marxist ideals.  Maybe it’s the outrages, contentious designs or silliness expressed in the Plan, including proposals for federal compensation for even persons “unwilling to work” or to ban jet travel and flatulent cows by the end of the next decade.  Maybe it’s controversial because of the resolute defense Ocasio-Cortez – a controversial person herself – and other self-styled socialist Democrats have given to the Plan of late.

The Plan is also controversial for the things it says.  Like:

We spend billions every year . . . turning our planet uninhabitable while imposing the greatest harm on communities of color and the poor.  The Green New Deal will instead redirect that money to the real job creators who make our communities more . . . sustainable and secure at the same time.

Who are these “real job creators”, we’d like to know, and how are they making “our communities more secure”?

These controversies notwithstanding, the following concentrates just on what the Green New Deal does for the nation’s housing crisis, both indirectly and directly:

First, the Plan’s call for the availability of only renewable energy by 2030 will have a sweeping impact on housing affordability, particularly the Plan’s express prohibition against nuclear power and clean coal.  What remains – solar, hydro, geothermal and wind – by most sober estimates doesn’t generate nearly enough energy to power the nation.  So, at a minimum, much of what’s on the drawing board for new housing today won’t be viable under the Plan tomorrow.

Second is the profound dislocation of workers currently employed by a company or industry that will soon be forced to shut down due to the Plan’s scarcity of fossil fuels.  (Maybe this is partly why the Plan’s cost is estimated to run as high as $93 trillion over the next ten years).  And for the U.S., now having achieved the status of net exporter of energy – an important national accomplishment for a lot of reasons – the Plan would make that all but disappear.  This one aspect of the Clean New Deal will have an incalculable impact on employment in the country which, in turn, will be extraordinarily damaging to housing affordability.

Third, is the Plan’s answer to this dramatic rise in unemployment:  How about 20 million new public sector jobs – all funded by you and me – to close the wound?  And, to these job beneficiaries would also go a “living wage”.  Not surprisingly, the Plan stays away from determining a “living wage” or what qualifies as a bona fide living expense.  Take housing, for example.  Does the “living wage” recipient rent or own a home?  Or, would a family earning a “living wage” be able to decide what type of housing they dwell in on their own?  It seems quite likely this economic uncertainty will have a telling impact on housing markets.

Fourth, requirements of the Plan having a more direct impact on housing affordability are the energy-saving apparatuses – fixed or otherwise – to individual homes of the future.  For example, under the Plan, all existing buildings – commercial and residential, both – are envisioned to be physically upgraded to meet new energy standards.  That means retrofitting tens of billions of square feet of developed real estate over the next 10 to 12 years.  Even if it were possible to acquire the labor and materials to accomplish the task during that period of time, what would be the cost?  And, would local governments in California allow those costs to be passed through – in the form of rents – in the five million or so rental properties in the state?  What about new housing?

Fifth, since the new energy standards will require rooftop solar systems – much like California’s impending mandate for all new homes – how are the middle-income families living from paycheck to paycheck, barely making their mortgage payments each month, going to afford a dramatic cash hit to the family pocketbook?  It’s likely they cannot.  Nor can they afford the tax hike that’s sure to come to cover their lower-income neighbor’s higher rent or retrofitting expense when that household can’t pay.  What happens to them?

Finally, it’s been speculated that the “social justice” advocates will get the Plan’s framers to include tenant-friendly eviction protections and new rent controls.  Who’s covering those costs?

In the end, the Green New Deal will be so disruptive to the nation’s economy – and housing markets – that the trauma will weaken the country and further divide it with hostility and fear.  We, the people, don’t need it now or ever.

onsultant specializing in housing issues.

This article was originally published by Fox and Hounds Daily

Newsom delays threat to block transportation funds to cities that flunk housing goals

LA-Freeway-Xchange-110-105In his first week in office, Gov. Gavin Newsom sent a strong warning to cities and counties: He was coming for their road repair dollars if they didn’t meet state goals for new housing.

“If you’re not hitting your goals, I don’t know why you get the money,” Newsom said when he announced his budget plans in January.

Two months later, Newsom is setting aside plans to withhold state transportation dollars from local governments for four years. The move, which comes after fellow Democrats pushed back on the idea, is part of a larger acknowledgment that revamping how California plans for growth will be more arduous than the governor implied on the campaign trail. …

Click here to read the full article from the San Diego Union-Tribune

Tax Free Policies to Increase California’s Housing Stock

affordable housingOne of the most frustrating contradictions inherent in the policies being enacted by California’s one-party state goes something like this: We are inviting the welfare cases of America and the expatriates of the world to move here, while simultaneously enacting environmental policies that make it extremely time consuming and expensive to build anything.

No wonder there’s a “housing crisis.” Until demand decreases, or supply increases, housing in California will remain unaffordable for most of its residents. But don’t expect demand to slacken any time soon. The political consensus in favor of increasing California’s population has a strong moral justification – why shouldn’t the wealthy, innovative, compassionate people of California be willing to share their wealth with millions more people who are less fortunate? But there are other less high-minded upsides to population growth and obstacles to new housing.

Currently, real estate prices and rents are on the rise, favoring investors and landlords. Banks enjoy higher lending volumes, while borrowers enjoy greater liquidity, however precarious, as the property bubble offers them more collateral as security. The government agencies profit from higher property tax assessments and higher capital gains collections on sales of real estate. Large land developers that have the political clout and financial heft to build housing despite the many obstacles, enjoy unusually high margins that they could never achieve in a normal competitive market. Finally, as an expanding population increases demand for housing, at the same time public school districts can increase attendance-based revenue – which will make it somewhat less urgent that they reform their union work rules and spending priorities.

Efforts by California’s policymakers to increase the supply of housing have to be viewed in this context. They want to increase the supply of housing. Yet they also want to keep happy the special interests that pay for their political campaigns. Therefore, strict – and very self-serving – parameters are likely to limit what new laws are enacted to stimulate new housing. For example:

Negative Consequences of Special Interest Defined Development in California

(1) Additional open land outside of urban boundaries will remain off limits to development, in order to ensure that existing municipal jurisdictions are able to retain access to the new property revenues that will accrue to new stocks of residential and commercial real estate. This will be justified as necessary to protect the environment.

(2) Most obstacles to housing construction will remain in place – in particular, excessive fees to government agencies and onerous CEQA requirements. This will ensure that only the most powerful corporate and financial entities will be able to take advantage of new opportunities to build housing, while cutting out the small landowners and developers.

(3) Major land developers will be given financial incentives by state and local government entities to build “affordable housing” and eliminate “blight,” but these incentives will be out of reach for smaller landowners and developers.

(4) In order to keep the real estate asset bubble fully inflated, housing prices will only fall marginally as development occurs, which pretty much helps nobody, but massive programs of taxpayer funded rent control and rent subsidies will be enacted to make up the difference for qualifying low income families.

(5) “Densification” will be imposed on residential neighborhoods, with the primary victims being any neighborhoods that are situated close to bus stops or light rail stations. Developers will be permitted to build multi-story, multi-unit buildings on small residential lots and will not be required to offer parking; all of this will greatly increase their profits.

(6) Building code requirements will relentlessly increase in the name of energy efficiency and safety, with the practical effect being to lock out small landowners and developers from being able to afford to upgrade their properties or develop new properties; these same more stringent regulations will not seriously impact large development corporations and financial investors.

It is wrong to be entirely cynical about the laws that are coming. Slamming the door completely shut on newcomers to California would be cold hearted, unpopular and probably cause more economic harm than good. Zealously enforcing residential zoning densities that were put in place several decades ago would be overly sentimental, ignoring the disruptive adaptations and radical transformations that have defined and enriched urban life since settlement began. Completely embracing a new wave of suburban sprawl would needlessly eat up more open land than a more balanced policy approach might cost. While the new building code mandates are now excessive (if not ridiculous), nobody wants to go back to toilets with seven gallon tanks, or insulation with an R value of 2.0.

Unfortunately, balance is not what we’re finding in the new laws. Last year, the State Senate considered a bill – SB 827 – that would have removed local zoning control and allowed multifamily housing to be built in well-established single family neighborhoods. This would have allowed those multifamily housing projects to be as tall as 55 feet. Against heavy opposition, SB 827 never made it out of committee, but this year it’s back. The new legislation, again sponsored by Democrat Scott Wiener, is SB 50.

Reading through the text of SB 50 grants insight into just how entrenched the collusion is between public officials and developers seeking subsidies and waivers. Consider this introductory language:

Existing law, known as the Density Bonus Law, requires, when an applicant proposes a housing development within the jurisdiction of a local government, that the city, county, or city and county provide the developer with a density bonus and other incentives or concessions for the production of lower income housing units or for the donation of land within the development if the developer, among other things, agrees to construct a specified percentage of units for very low, low-, or moderate-income households or qualifying residents.

In plain English, the “Density Bonus Law” forces taxpayers to subsidize not only developers who are already making more money by being allowed to pack more units on less land, but also low and “moderate” income households who will occupy a percentage of housing units. Bring ’em in! Paying artificially high prices for housing while also paying for someone else’s inflated rent will never wear thin with taxpayers.

The Coalition to Preserve LA, “a citywide movement of concerned residents who believe in open government, people-oriented planning, equitable housing and environmental stewardship of Los Angeles,” produced this summary of SB 50.

Densification a la SB 50:

  • Forces cities to allow luxury towers in single-family areas.
  • Upzones thousands of beautiful streets to 6- and 8-story apartments if an area is “jobs-rich with good schools.”
  • Upzones thousands of single-family areas within a 1/4 mile of a frequent bus stop or 1/2 mile of a rail station.
  • Lets developers sue any city that tries to stop them.
  • Cuts parking to zero, claiming rich residents “use transit.”
  • Falsely claims to protect renters & sensitive communities.
  • Strips protections of many HPOZs and historic buildings.
  • Lets developers wipe out setbacks, backyards, green belts.

For millions of Californians who live in bucolic suburbs, with tree lined streets and spacious private yards, SB 50 unchecked is going to be a holocaust. It will utterly destroy their way of life. Many victims will not have the ability to move. The greatest insult of all: Their taxes will be paying for it. And as a “solution,” it is completely unnecessary. There are better ways, that leave established neighborhoods intact and cost taxpayers nothing.

Reforming the California Environmental Quality Act (CEQA)

There are two ways to mitigate the impact of CEQA, the law that requires “environmental impact reports” on any land development in California, including “climate change” impact along with a host of metastasizing additional requirements. The first, being practiced increasingly, is to grant CEQA waivers to politically connected developers that are proposing projects deemed politically correct. The second, far preferable solution, is to fundamentally rewrite CEQA.

An excellent summary of how to reform CEQA appeared in the Los Angeles Times in Sept. 2017, written by Byron De Arakal, vice chairman of the Costa Mesa Planning Commission. It mirrors other summaries offered by other informed advocates for reform and can be summarized as follows:

  • End duplicative lawsuits: Put an end to the interminable, costly legal process by disallowing serial, duplicative lawsuits challenging projects that have completed the CEQA process, have been previously litigated and have fulfilled any mitigation orders.
  • Full disclosure of identity of litigants: Require all entities that file CEQA lawsuits to fully disclose their identities and their environmental or, increasingly, non-environmental interest.
  • Outlaw legal delaying tactics: California law already sets goals of wrapping up CEQA lawsuits — including appeals — in nine months, but other court rules still leave room for procedural gamesmanship that push CEQA proceedings past a year and beyond. Without harming the ability of all sides to prepare their cases, those delaying tactics could be outlawed.
  • Prohibit rulings that stop entire project on single issue: Judges can currently toss out an entire project based on a few deficiencies in environmental impact report. Restraints can be added to the law to make “fix-it ticket” remedies the norm, not the exception.
  • Loser pays legal fees: Currently, the losing party in most California civil actions pays the tab for court costs and attorney’s fees, but that’s not always the case with CEQA lawsuits. Those who bring CEQA actions shouldn’t be allowed to skip out of court if they lose without having to pick up the tab of the prevailing party.

Unfortunately, California’s new governor, Gavin Newsom, while acknowledging problems with CEQA, has put responsibility for recommending changes to CEQA in the hands of a task force consisting of labor union officials and land developers. It will be a surprise if a group dominated by these two special interests will be capable of coming up with the solutions recommended by De Arakal and others.

Principles of Appropriate Development in California

There is a moral imperative to increase the supply of housing in California. As noted, California’s policymakers have awakened to the fact that construction of new housing is not nearly meeting demand for new housing. But the way they’re going about stimulating housing construction is flawed. It will not appreciably lower the cost of housing and it will needlessly enrich special interests. Here are some ways housing could be more appropriately developed in California:

(1) Eliminate all forms of government subsidies, incentives or waivers to any developers. All players in the housing industry should be unsubsidized, and playing by the same set of rules.

(2) Stop requiring diverse types of housing within the same development or neighborhood. Mixing high-density, subsidized housing into residential neighborhoods devalues the existing housing, and this social engineering is unfair to existing residents who have paid a high price to live there.

(3) Roll back the more extreme building codes. Requiring 100 percent of homes to be “energy neutral” or include rooftop photovoltaic arrays, for example, greatly increase the cost of homes.

(4) Lower the fees on building permits for new housing and housing remodels. Doing this might require pension reform, since that’s where all extra revenue goes, but until permitting costs are lowered, only billionaire developers can afford to build.

(5) Speed up the permitting process. It can take years to get permits approved in California. Again, the practical effect of this failure is that only major developers can afford to build.

(6) Reform the California Environmental Quality Act as noted. Better yet, scrap it altogether. Federal laws already provide adequate environmental safeguards.

(7) Make it easier to extract building materials in-state. California, spectacularly rich in natural resources, has to import lumber and aggregate from as far away as Canada. This not only greatly increases construction costs, it’s hypocritical.

(8) Increase the supply of land for private development of housing. Currently only five percent of California is urbanized. There are thousands of square miles of non-farm, non critical habitat that could be opened up for massive land development.

(9) Engage in practical, appropriate zoning for infill and densification in urban cores, but only after also increasing the supply of open land for housing, and only while continuing to respect the integrity of established residential neighborhoods.

California has unaffordable housing because extreme environmentalists have imposed an agenda onto state policymakers that, unfortunately, dovetails perfectly with the agenda of special interests – in particular, public sector unions and bureaucrats, and large corporate land developers and construction contractors. This coalition is also responsible for the related problem of neglected infrastructure in California. Until California’s voters wake up and break this immoral, self-serving coalition, there is little hope that housing prices in particular, or the cost-of-living in general, will come down in California.

This article originally appeared on the website of the California Policy Center.