California’s ‘elaborate shell game’ on housing
50-year-old home-building law seen as a failure
After an hour of debate, Herb Perez had had enough.
Perez, a councilman in the Bay Area suburb of Foster City, was tired of planning for the construction of new homes to comply with a 50-year-old state law designed to help all Californians live affordably.
Everyone knows, Perez told the crowd at a 2015 City Council meeting, that the law is a failure. It requires cities and counties to develop plans every eight years for new home building in their communities. After more than a year of work and spending nearly $50,000, Foster City had an 87-page housing plan that proposed hundreds of new homes, mapped where they would go and detailed the many ways the city could help make the construction happen. But a crucial element was missing: Foster City was never going to approve all that building, Perez said.
“What I’m seeing here is an elaborate shell game,” Perez said. “Because we’re kind of lying. It’s the only word I can come up with. We have no intention of actually building the units.”
Perez’s prediction came true. Despite soaring demand for housing in the Bay Area, the city hasn’t approved any new development projects in more than five years.
Foster City’s experience is shared by governments
across California: The law requires cities and counties to produce voluminous plans — but doesn’t hold them accountable for any resulting home building.
The law, passed in 1967, is the state’s primary tool to encourage housing development and address a statewide shortage of homes.
Now, a bill from state Sen. Scott Wiener (D-San Francisco) would force cities and counties that have fallen behind on their housing goals to eliminate barriers to development, such as multiple planning reviews for individual projects. Wiener’s legislation passed the state Senate in June and is awaiting a vote in the Assembly.
“The system is so broken,” Wiener said. “It gives the public a false sense that a step has been taken toward having more housing when in fact it’s just an illusion.”
One of the main criticisms of the law is that it hasn’t spurred enough new home building. Fewer than half of the 1.5 million new homes the law said developers would need to build over eight years leading up to 2014 — the law’s most recent reporting period — were built.
In addition, state officials don’t know if cities and counties have met their housing goals. Local governments are supposed to give the state information on home building each year, but many don’t. As a result, there is no reliable measure of how many houses are being built in California for low-, middle- and upper-income residents.
State lawmakers have known about the law’s weaknesses for decades but haven’t fixed them. They have added dozens of new planning requirements but have not provided any incentive, such as a greater share of tax dollars, for local governments to meet their housing goals.
California’s housing affordability troubles have contributed to the state’s poverty rate, which is the highest in the nation. It also has burdened millions with high rents and, according to a recent study by the McKinsey Global Institute, created a more than $100-billion annual drag on the state economy by lowering disposable incomes and limiting construction jobs.
Developers in California need to roughly double the 100,000 homes they build each year to stabilize housing costs, according to the McKinsey study and reports from the state Department of Housing and Community Development and the nonpartisan Legislative Analyst’s Office.
Home construction depends on complex factors including the cost of land, materials and labor, the availability of financing for developers and interest rates on mortgages for homeowners. But decisions
by California’s cities and counties are important too.
More than two-thirds of California’s coastal communities have adopted measures — such as caps on population or housing growth, or building height limits — aimed at limiting residential development, according to the Legislative Analyst’s Office. A UC Berkeley study of California’s local land-use regulations found that every growth-control policy a city puts in place raises housing costs by as much as 5% there.
The housing supply law, known formally as the “housing element,” is supposed to help knock down local barriers to development by requiring cities to plan for new housing that would accommodate children born in California and people expected to move to the state. Over an eight-year period, state officials send estimates of housing needed to meet projected population growth to 19 regional agencies.
These agencies outline how many new homes are needed for very low, low, moderate and above-moderate income levels. So, in theory, all cities and counties would receive their fair share of growth. Local governments must show that they’ve zoned enough land for the new housing — and the state must sign off on those plans. But the state doesn’t hold cities accountable for the goals they set, and the plans are often ignored.
Even so, city and county officials resent the law, arguing that it unfairly takes away their power over development in their communities.
To avoid complying, local governments have over the years asked state lawmakers to, among other things, count prison beds and student dormitories as lowincome housing and allow cities that place foster children in their communities to reduce the number of low-income homes they need to plan for.
At the base of the San Gabriel Mountains, the affluent bedroom community of La Cañada Flintridge has few apartment or condominium complexes — and many of the city’s 20,000 residents and public officials want to keep it that way.
Four years ago, city leaders wrote a plan to make room for multifamily housing in several sections of the city. But, to discourage developers, they chose areas already occupied by singlefamily homes and, in one case, a big-box retailer.
Herand Der Sarkissian, a former La Cañada Flintridge planning commissioner who approved the city’s housing plan, said it didn’t make sense for the state to try to force low-income housing there because of the city’s high land costs. Any state efforts to integrate housing of all income levels into wealthy communities are doomed, he said.
“People like people of their own tribe,” Der Sarkissian said. “I think the attempt to change it is ludicrous. Be it black, be it white. People want to be with people who are like them. To force people through legislation to change in that way is impractical.”
None of the multifamily housing called for in the La Cañada Flintridge housing plan has been built.
In Redondo Beach, officials told the state in 2014 that they would work toward the city’s housing goal by supporting a proposed commercial and residential development with 180 apartments — nine of them reserved for very poor families — to replace a run-down strip mall and parking lot along Pacific Coast Highway. The city zoned the land for that amount of housing.
But the city ultimately approved 115 apartments with none set aside for lowincome residents. The developer has since sued Redondo Beach, and the project remains in limbo.
Some new homes were built in both cities from 2006 to 2014, but far fewer than were outlined in the cities’ plans over that period.
These and similar examples across California show that the housing law is a “complete farce,” Wiener said.
“Many local communities basically run a scam where they spend all sorts of time — lots of public hearings, lots of public discussion — and then it’s over and you have this collection of paper sitting on a shelf,” Wiener said.
Sandwiched between wealthier communities to the north and south and more industrial areas to the east, the coastal Los Angeles County city of Torrance has swaths of single-family neighborhoods and lots of land for commercial and industrial business.
Torrance’s growth has slowed. Less than half of 1,828 houses called for in the city’s previous housing plan were built, according to construction permit data.
The lack of home building has had consequences.
Nearly 40% of Torrance’s 147,000 residents now spend more than 30% of their incomes on housing, according to federal data.
In 2014, Toyota Motor Corp. decided to relocate its North American headquarters — and 3,000 jobs — from Torrance to Plano, Texas, citing as one factor the Lone Star State’s lower cost of living.
High costs have left housing in Torrance out of reach for Azucena Gutierrez and other workers in the city.
Every weekday, Gutierrez spends two hours driving to Torrance homes to teach prenatal and infant care to new and expectant parents. Gutierrez, 38, earns less than $15 an hour.
She lives in Los Angeles’ Boyle Heights neighborhood, crowding into a twobedroom apartment with her husband — a substitute teacher — and their 14-yearold son and 5-year-old daughter. Steep housing costs have forced Gutierrez’s older sister to move in with them too.
Gutierrez would like to live near her job and for her children to attend Torrance’s better-rated schools. But the $1,600-a-month rent she saw advertised for a onebedroom apartment in Torrance was more than the $1,500 she pays now for more room across town.
Today, the state lacks basic information on the law’s effectiveness. More than a quarter of California’s 539 cities and counties failed to tell the state how many homes were built within their boundaries over the eight-year period leading up to 2014, according to a Times review of housing department data.
Wiener’s legislation would require all cities and counties to turn in homebuilding data and remove some of their ability to review and block new development if they fall behind their housing goals.
Still, if the state plans to hold cities and counties accountable for meeting those targets, the targets themselves might require reevaluation.
Bay Area counties are on track to meet their overall home-building goals for the eight-year reporting period that ends in 2023, the Legislative Analyst’s Office found recently.
But developers aren’t building nearly enough homes to affect affordability, the analyst’s office also said. The Bay Area has added half a million more jobs than houses since 2011, and other fast-growing parts of the country — around Austin, Texas; Portland, Ore.; and Raleigh, N.C. — are building homes at more than twice the rate of the Bay Area.
Developers have built more than 500 homes in Foster City since the council approved its housing plan in 2015, a number that already exceeds the new houses called for under the plan through 2023.
But those new homes came from projects approved before 2012 that home builders are just now putting on the market. The city has turned away other developers interested in building housing where the city’s plan said they could, said Perez, the Foster City councilman.
Perez believes that state politicians should hold cities accountable for approving new housing projects by providing money to local governments that do and penalizing those that don’t. Otherwise, he said, cities will continue to act as he said Foster City did — signing off on plans to appease state regulators but blocking housing from being built.
“I think the most important part of this is that there’s complicity on the part of the state,” Perez said. “They created this fake thing that they know no one has any intention of doing, and then they say they’ve done something about housing.”
liam.dillon @latimes.com Twitter: @dillonliam