The right housing incentive

As Gov. Jerry Brown and California’s legislative leaders left for their summer break, they said the top priority when they returned would be addressing California’s housing affordability crisis. They’ll consider a bevy of bills, with an emphasis on providing funds for housing development. More funding will help, but it can’t solve the crisis. To effectively alleviate the housing shortage, the state must also ensure that local governments responsibly use their power to regulate land use.

Throughout the U.S., municipalities adopt zoning ordinances to govern development and land use. In California, local zoning must — in principle — accommodate housing affordable to lowerincome households. Building apartments, rather than singlefamily homes, is the most efficient way to accomplish this goal. But even when local zoning allows for high-density development, lengthy local review processes and political opposition frequently stymie such projects in California.

Massachusetts, facing a similar situation, passed a law that provides a promising model for California. It shifts some power over land use away from local governments that aren’t meeting state affordable housing goals. Although the law is controversial, it has proved politically resilient, and Massachusetts voters soundly rejected a 2010 ballot measure to abolish it.

Two components distinguish the Massachusetts law. First, qualifying projects — in general, those reserving at least 25% of the units for households earning 80% or less than the area’s median income — are eligible for a “comprehensive permit.” The comprehensive permit expedites the local review process, and it enables developers to propose projects at higher densities than otherwise permitted. The resulting projects can thus provide market-rate units as well as those that are affordable to low-income households. (California needs more of both.)

The second component is an appeals process. If a comprehensive permit is denied or is subject to conditions that are unacceptable to the developer, the state can require the municipality to demonstrate “a specific health or safety concern of sufficient gravity to outweigh the regional housing need.”

In effect, the appeals process provides for an override of local decision-making. Municipalities are exempt from the appeals procedure only if they have accommodated their fair share of affordable housing, as defined by state law, or if they have a state-approved housing production plan and can show measurable, consistent progress toward meeting the state’s standard.

I analyzed the effect of the Massachusetts law with real estate economist Lynn Fisher. According to our research, developers of rental projects proposed between 1999 and 2005 in the suburbs of Boston generally used the law to build in places where more housing could do a lot of good — municipalities that were relatively accessible to jobs but that had previously placed stringent restrictions on apartment projects.

There are good reasons that California and other states give local governments primary authority over land-use regulation, and equally good reasons to ensure that this authority is exercised responsibly. Local officials are best positioned to understand the effects of development on a given site and are best equipped to recognize the interests of current residents. But local officials’ attention to those very interests can scuttle appropriate development proposals.

In California, a bill to provide for a comprehensive permit system is pending in the Legislature, but it doesn’t currently include a robust appeals process. Legislators should add one and, at the same time, authorize funding and technical assistance to help municipalities plan for new development and provide adequate infrastructure.

As anyone who has recently searched for housing in the Boston area knows, the Massachusetts approach is not a panacea for housing affordability. No single policy will solve housing shortages that have been mounting for decades. But the Massachusetts model shows how California could effectively encourage local governments to help address the state’s housing affordability crisis.