California’s Housing Zoning Problems
In fact, there have been many attempts to use State law to address the zoning problem, but none have been successful. One such attempt is the Housing Element Law. According to California’s housing department, the law requires that “all local governments (cities and counties) adequately plan to meet the housing needs of everyone in the community” (Regional Housing Needs Allocation). This law was passed in 1969, when the housing price in California was just 30% more than the national average, and has failed to stop the price increase that followed (Housing Department, Regional Housing Needs Allocation). One reason for its failure is its complexity. The law has multiple objectives: it attempts both to ensure that there is a sufficient supply of housing constructed, and to ensure that this housing is affordable to Californians of every income level, based on a metric that defines affordable housing at 30% of their income level (Housing Department, Regional Housing Needs Allocation). Due to the difficulty of understanding this law, only two-thirds of cities are in compliance (Public Policy Institute, “California’s Housing Element Law”). But compliant cities did not increase their housing supply any faster than noncompliant cities (Public Policy Institute, “California’s Housing Element Law”). Part of the reason for this is that it requires that cities zone for sufficient housing growth, but has insufficient safeguards to ensure that this development is feasible. For instance, in many cases cities can count the full increase in capacity allowed by redevelopment, even though building in these zones would require the expensive process of removing existing supply (Housing Department, “Analysis of Sites and Zoning”). The law is a failure among compliant cities and noncompliant cities alike.
Another attempt to deal with this issue is the density bonus law. This law, around since 1979, gives developers a 35% density bonus and other concessions provided they set aside a certain percentage of housing units to be rented or sold at “affordable” rates (California Legislative Information, “Density Bonuses and Other Incentives”). The law itself is a relatively minor matter. If all new development used the density bonus law, it would be equivalent to a 35% increase in housing construction, which would be insufficient to bring California housing production back to historical levels, which at 200,000 units per year, was more than twice the 80,000 units per year that have been constructed in the last decade. As it is, very little housing is created using this law (Duewel, 678-679). It has too many requirements. Not only does setting aside units cut into the profits of developers, but the developers could also have to pay “prevailing wages” (Duewel, 679). Prevailing wages, as defined by the California Government, are not average wages. A prevailing wage is the wage that is paid to the greatest number of employees (Department of Industrial Relations, “Prevailing Wage”). Suppose a situation involving 100 non-union workers and 20 union workers. Because the non-union workers each bargain independently for their wages, their wages are spread out more or less evenly between $20 dollars and $30 dollars. The union workers have their wages fixed by contract at $45 dollars and 70 cents. The prevailing wage in this situation is $45 dollars and 70 cents, because no exact wage amount between $20 dollars and $30 dollars is collected by twenty or more workers. On average, California developers would be forced to pay 89% more than market wages, a difference that is equivalent to about 37% of construction costs (Newman and Blosser 3). Hence, it usually isn’t worth it to most developers.
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State Senate Bill 827 also attempted to ensure local housing zoning rules are sufficiently loose. This bill, introduced into the State Senate in January 2018, would have loosened zoning requirements near “major transit stops” (California Legislative Information, SB 827). Specifically, this bill would have allowed structures up to 55 feet and a total floorspace of 3.5 times the size of the building lot within one-quarter mile of a major transit stop, and structures up to 45 feet and a total floorspace of 2.5 times the area of the building lot within half of a mile of a major transit stop (California Legislative Information, SB 827). Parking requirements would also be eliminated or severely reduced in these areas (California Legislative Information, SB 827). The bill failed to make it out of committee (California Legislative Information, SB 827). One reason for its failure was do to its blunt nature. The bill uses a poor definition of access to mass transit: it does not test whether the transit stop actually has access to where the residents would need to go. It would have stripped away a large part of the zoning authority from local governments, and force them to accept the solution of the California State Government, even if they could find a better way of building the housing. Hence, the bill was killed by political opposition. Any new attempt would need to learn from the failures of these bills.
The best solution would likely be amending the Housing Element Law to give a sufficient margin to the feasibility of development. This can be done via two simple changes. First, the law should reduce the value gained by upzoning parcels by a factor of four. For example, a city would have to allow five housing units in a parcel currently occupied by one housing unit in order to count one housing unit towards the city’s growth allowance requirement. This will ensure enough redevelopment is zoned to make it feasible. Second, instead of calculating how many houses each city or county needs to build, the law should require a 50% growth and feasibility margin on top of their current population. For example, a city with 1 million would have to be zoned to allow growth up to 1.5 million people. This will ensure that zoning laws do not significantly impede housing growth. To ease compliance with this law, and to allow more certainty to developers, California zoning types should be standardized throughout the state. Necessary environmental reviews can be conducted at the time of zoning, and provided developers comply with this zoning, development can proceed by right. These steps will help ensure that housing is affordable to the next generation of Californians.