Report Says Housing Boom Won’t Make It More Affordable in California

Wednesday, September 30, 2015

 “Housing Is Back” nationally, according to a new report (pdf) by that name in the UCLA Anderson Forecast. Housing starts in 2015 are expected to double the paltry 550,000 in 2009 and climb above 1.4 million in 2016 and 2017.

But a companion essay by senior economist Jerry Nickelsburg is far less sanguine about the situation in California. In an essay you have to pay to see, Nickelsburg poses the question, “California Housing—Will It Ever Be Affordable?” and doesn’t seem to have a positive answer.

“The economics are clear,” he wrote, according to L.A.’s City News Service. “When affordable housing is provided, say by requiring developers to have a fixed percentage of their new units ‘affordable,’ then the demand for that housing will be in excess of the supply.”

And that’s pretty much how the affordable housing industry rolls. Efforts to simply build more affordable units encounter zoning codes, building regulations and socio-economic and political constraints.

Nickelsburg suggests there is a better way: Target the housing.  

“Affordable housing policy needs to be explicit about who the housing is for,” he wrote. If a city wants its police officers to live in the city, target them. Or, “one might advocate affordable housing so that teachers in public schools can purchase housing that would otherwise be difficult for them to acquire.”

Mass transit corridors offer a potential venue for the housing, but it would take a massive burst of enthusiasm for both to have an impact. “Realistically, this is not going to happen in the coming few years,” he wrote.

The coming years might be a bit less predictable since the California Supreme Court decided California Building Industry Association v. City of San Jose in June. The justices let San Jose require that all new developments of 20 units or more have 15% below market price or pay a fee.

There would be no project-by-project negotiations over whether inclusionary affordable housing requirements apply. It’s citywide. For now. The case has been appealed to the U.S. Supreme Court.

California Chief Justice Tani Gorre Cantil-Sakauye, writing for the court, began her opinion with a recitation of the state health and safety code that cites the Legislature’s declaration that there existed “a serious shortage of decent, safe, and sanitary housing which persons and families of low or moderate income . . . can afford.”

The declaration was 35 years old. And now, the chief justice wrote,

“These problems have become more severe and have reached what might be described as epic proportions in many of the state’s localities. All parties in this proceeding agree that the lack of affordable housing is a very significant problem in this state.”

It is less clear what will actually be done about it.

–Ken Broder


To Learn More:

California Housing Will Get Even Less Affordable, UCLA Forecast Says (by City News Service)

California Supreme Court Upholds Affordable Housing Ordinance (by Richard Frank, Legal Planet)

California Supreme Court Upholds San Jose’s Affordable Housing Rules (by Rachael Myrow, KQED)

California Building Industry Association v. City of San Jose (California Supreme Court) (pdf)

Housing Is Back (by David Shulman, UCLA Anderson Forecast) (pdf)

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