Transcript What’s Really Behind the Supply Problem?

Affordable Housing
and Supply
in California
Victoria Basolo, Ph.D., AICP
Dept. of Planning, Policy & Design
University of California, Irvine
UCI
Production
Roller Coaster
180,000
160,000
NO. UNITS
140,000
120,000
Single-Family
Units (Permits)
100,000
80,000
Multi-Family
Units (Permits)
60,000
40,000
20,000
YEAR
Source: California Department of Finance and U.S. Census Bureau.
02
20
00
20
98
19
96
19
94
19
92
19
90
19
88
19
86
19
84
19
19
82
0
How severe is the
shortage?
 About 220,000 units needed a year through 2010
(Landis, et al., 2000)
 A shortfall of approximately 138,000 units in 2000,
after controlling for demographic variables
(Johnson, et al., 2004)
 “Nearly 250,000 homes and apartments are
needed each year” (Nevin and Colby, 2005)
Where’s the
shortage?
 Geographic: Los Angeles area, San Diego
County, and the San Francisco Bay Area (Landis
et al., 2000; Johnson et al., 2004)
 Lower-Income: 651,000 shortfall of affordable
housing units (California Budget Project, 2002)
Why is there a
shortage?
Claims/Assertions
1. Local development entitlement process delays
production, increases cost
- Single-family vs. (affordable) multi-family
Studies of Development
Fees/Exactions
 A study of jurisdictions in Contra Costa County found that
fees raised the cost of a home from between $20,000 to
$30,000
 In some cases, the developer could pass on 100% of the
costs to the buyer, in other cases, the developer had to pay
about 75% of the costs of fees (Dresch and Sheffrin, 1997)
 A study of 89 local governments found that fees added an
average of $24,525 to single-family units and about $15,500
per apartment unit (Landis, et al., 1999)
Why is there a
shortage?
Claims/Assertions
2. Local growth control regulation prohibits
development
- Many initiatives passed with a range of
constraints
Growth Control Ballot
Initiatives, 1986-2000
 Anti-growth measures have been a popular response to
growth by California communities
 Southern California and San Francisco Bay Area lead the
way in number of ballot measures proposed and adopted
 Voter requirements (approval of development) and urban
growth boundaries (UGBs) are the two approaches that
gained in popularity over time -- Southern California uses
voter requirements most frequently; the Bay Area uses
UGBS most often (Nguyen, 2004)
Why is there a
shortage?
Claims/Assertions
3. There is little or no land left to develop (at least
in urbanized areas)
- There is over 24 million acres of potentially
developable land in the state (Landis, et al.,
2000)
Why is there a
shortage?
Claims/Assertions
4. Housing doesn’t pay – the effects of Prop 13
continue to be felt
- Fiscalization of land use and the belief that a
home must cost $550,000 to pay for itself –
no definitive research on this topic
Why is there a
shortage?
Claims/Assertions
5. Cities, for the most part, do not want affordable
housing, although this is the area of greatest
need (starter single-family homes/condos for
ownership and multi-family rental housing)
City Affordable Housing
Programs and Expenditures
 Cities in a region compete against each other for economic
benefits and higher levels of inter-city competition result in
cities:
1. Being less likely to spend any of their own source
revenues on affordable housing
2. Being more likely to spend on economic development
compared to affordable housing
3. Being more likely to support homeownership
programs compared to rental programs (Basolo,
2000, 2005; Basolo and Huang, 2001)
Why do we care about a
housing shortage?
Cost of
Single-Family Housing
400,000
NO. UNITS OR $
350,000
300,000
Median Sales Price
250,000
Single-Family Units
(Permits)
200,000
150,000
100,000
50,000
0
19
82 984 986 988 990 992 994 996 998 000 002
1
1
1
1
1
1
1
1
2
2
YEAR
Source: California Department of Finance and U.S. Census Bureau.
Cost of
Multi-Family Housing
800
700
140
120
DOLLARS
600
500
100
80
400
300
60
200
40
100
20
0
19
0
82 984 986 988 990 992 994 996 998 000 002
1
1
1
1
1
1
1
1
2
2
YEAR
Source: California Department of Finance and U.S. Census Bureau.
NO. UNITS (1000s)
180
160
Median Contract
Rent
Multi-Family
Units (permits)
Longer Commute Times
Consequences
for the Economy
Executives view the lack of adequate housing as an
impediment to doing business
 Tight supply associated with higher cost housing = more difficulty
attracting and retaining a strong workforce (without paying
significantly higher salaries/wages)
 Tight supply and higher housing costs associated with longer
commutes for workers = more difficulty attracting and retaining a
strong workforce + traffic congestion (highway and air quality
deterioration) + lost productive time (time used driving could be
used at work or with family)
Existing Responses
to Shortage
Cities and Counties:
 Do nothing
 Implement existing programs “status quo” policy
 Inclusionary housing continues to be a popular
strategy for cities
State:
 Statewide ballot measures such as PROP 46
 State attempts to put teeth in its planning laws
What could we be doing
now and in the future?
 Support state legislation to create
participatory and effective regional plans
Regional planning would involve: 1) Localities in each region
negotiating the details of their regional plan, thus being masters of
their shared destiny; and 2) Linking housing needs to jobs in
communities, recognizing the spin off effect of “good” jobs (include
employers in working on solutions)
Regional planning would link state to regional funding to traffic and
air quality targets (reward regions that reduce traffic and improve
air quality through their housing programs such as TODs, higher
density infill near job centers, etc.)
What could we be doing
now and in the future?
 Reform PROP 13
Two provisions:
1) Remove retention of low property tax in transfer of
property to family members/across generations;
2) Remove retention of low property tax on second homes
What could we be doing
now and in the future?
 Create Housing Trust Funds (state and
regional)
 Reform State-Local Financing
Acknowledgements
My sincere thanks to the researchers providing
information for this presentation and to the state
and local housing staff, elected officials,
developers, bankers, real estate professionals,
housing advocates, and legislative consultants
that provided interviews from 2003-2005 to me
about California’s housing situation
UCI