State’s Housing Director Spells Relief: “Less Local Regulation”

What is the extent of California’s current housing need?

The need to provide affordable housing for those with median incomes and below remains significant, and the housing affordability gap is evident. Last year we needed to produce between 250,000 and 300,000 units: of that, we ended up with about 150,000. So we still have a lot of work to do.

Aside from the recession, what do you believe is inhibiting the production of housing in California?

Certainly the recession has had a significant effect. And, of course, California remains a state that has extremely high land costs. But there’s more to it than that there’s the significant problem of regulation at the local level, which has a major impact on housing.

How has HCD been addressing the issue of regulation?

A number of things have been done. We already have a tool to bring about responsible local practices — the housing element law, passed 25 years ago. It contains the mandate that local governments address their regulatory constraints so they don’t become impediments to housing development. Carrying out that law is a critical part of what we do at HCD.

We have seen many cases where the decision-making of local communities was clearly in conflict with the housing element law. In those cases, HCD has become very aggressive in using whatever means necessary — from jawboning to lawsuits — to have local communities drop those constraints.

Beyond that, the problem of regulations — whether it be in the business of developing housing or in other businesses — has to be addressed comprehensively. The Governor has commissioned the Council on California Competitiveness to assess what is causing businesses to leave California and what is increasing the costs of doing business. With that authoritative report completed by a well-respected panel, we’re ready to tackle these issues in an overall fashion.

But to what extent will such regulatory relief really spur housing production?

All you need is some simple arithmetic. If you shave 10% or 15% off the cost of regulation, that’s the difference that could allow someone to afford a home. In many areas, such as San Diego, there’s about a $15,000 gap between median income and what’s needed to afford the median priced home. If you look at the affordability gap and consider how to close it, cutting some of those costs will get you there.

How are you trying to give housing elements more teeth so they become effective?

We have undertaken a rather aggressive effort to visit face to face with localities. That puts a human face on a state bureaucracy and also lets us appreciate a little better the limitations local planning officials face in drawing up a valid housing element. It’s already beginning to produce some results. We’ve sent a representative to Los Angeles to meet with the head of the Planning Department to let them know why we think they weren’t able to bring their element into compliance.

Specifically, how is the state intervening to push Los Angeles housing policy in a different direction?

I didn’t participate in the meeting on the housing element, so I can’t give you details on that. But we are involved with helping the City of Los Angeles’ rebuilding process through a number of initiatives, including an effort to redirect $25 million from the Federal Highway Administration trust fund back to South Central Los Angeles for housing and other community development activities. In addition, the Governor is attempting to reform a loan guarantee program for small businesses. Though these aren’t necessarily housing policies, we’re moving on several fronts to help rebuild Los Angeles.

We’re pleased to work with the Redevelopment Agency in Los Angeles which has been a fairly ambitious housing provider, spending much more than its 20% requirement. We’ll be continuing that effort in a number of important ways.

Also, we hope Los Angeles’ housing element will correct something that happened recently in a project called Casa Gloria, which has gotten notoriety lately for its high development costs. The costs grew from $132,000 per unit to $234,000 per unit simply due to design requirements imposed upon the sponsor by the City of Los Angeles. That’s a doubling of the costs of affordable housing simply due to local requirements.

Your department recently released a study from UC Berkeley researchers comparing the building costs of market-rate units with affordable housing developments. Though the study made that same point, non­profits locally accused HCD of comparing apples and oranges. How do you respond?

I’ve been concerned about costs since I arrived at HCD and observed what we had to spend on low-income housing. The Berkeley study is a good study. I appreciate the comments that it wasn’t necessarily looking at comparable products. On the other hand, the costs of these low-income developments is simply unacceptable. The study wasn’t designed to divide between profit-motivated and non-profit-motivated development: both sets of developers want the best deal possible. But I hope the Casa Gloria project and others are wake-up calls.

We’re also participating in a larger study now being done with LISC and others which is getting into greater detail on what is influencing the cost of multi-family housing. While I don’t want to take the covers off a draft report, the preliminary findings show the same things that I’ve been complaining about regarding local regulation.

There was a piece of legislation from 1990 — SB 2011 — an “anti-NIMBY” law that severely limits the ability of local governments to turn down affordable housing projects. It’s consistent with your regulatory relief strategy, yet it has barely been invoked in the last two years. How effective is this law?

That’s an excellent question. I don’t think enough people know about it. We’ve had a couple of cases where we’ve been able to get a little more cooperation from local governments. But educating housing providers of the protections afforded in SB 2011 is something we need to do more. It was a good bill.

With the recent budget cuts to local governments and redevelopment agencies and the state bond moneys for housing running out, where will the money for affordable housing come from in the next few years?

There’s no question the fiscal situation will be leaner. Moreover, even if we could have gotten a housing bond initiative through the legislature, the likelihood of getting voter approval was very small. That means we’re left with taking advantage of new resources coming to redevelopment agencies, and with federal programs such as the HOME program, Section 8, and the Low Income Housing Tax Credits.

The resources that will get us through the next couple of years (until we have an opportunity to advance another voter-backed bond initiative) are actually significant. In fact, if you look back over the last few years, redevelopment agencies accumulated set-aside reserves of over $300 million and income of $150 million or more annually. Yet that went unused and became a target in the budget cutting exercise. What a crime.

Finally, what will be this administration’s upcoming legislative priorities on housing?

Much of our recent attention has focused on fiscal matters. Now, as we look to a new legislature with our budget problems behind us, we’ll have the opportunity to focus on what legislation is needed — particularly in housing elements and redevelopment.

Several reforms outside of land use and housing will contribute to the legislative and regulatory agenda for 1993. For example, Proposition 165, the Governor’s budget and welfare initiative, isn’t directly tied to housing but will complete the fiscal restructuring necessary so that greater attention can be paid to housing. The Council on Competitiveness’ proposals are critical to housing because it’s a comprehensive way to reduce the cost of doing business in the state. And the growth management issues — the recommendations of the Governor’s Interagency Task Force on Growth Management — will influence our thinking on housing issues.

These areas outside of the housing arena itself are critical to helping improve the forecast for affordable housing.