The affordable housing crisis has been a topic of longstanding debate in California, and for good reason. Millions of families are currently forced to spend more than 30% of their income on housing, and the average new home costs seven times annual income, up from three times annual income 50 years ago.
Laws such as newly enacted Senate Bill 423 lay out the only truly feasible roadmap for solving this problem, which is to remove or limit barriers to the production of housing. SB 423 takes a bold step that previous reforms have avoided: it extends its provisions to areas under the purview of the California Coastal Act. It’s a good start that addresses real problems, but if we truly want to lower housing costs in California, it’s only that — a start.
There are many factors that contribute to rising housing costs, but the Legislative Analyst’s Office identified two that are unquestionably driving the price increases here: regulatory hurdles and the economics of supply and demand.
The economics part is obvious — California needs to build 210,000 homes each year to meet population growth and we’re currently building roughly half that.
The regulatory hurdles are more complex, but at bottom they heavily influence the type of homes and units that get built, and their final cost. The longer a project takes to get approved, and the more permit applications (or reapplications), surveys, hearings, and lawsuits that take place, the more expensive a house or rental unit must be to recover the cost of development.
Environmental regulations such as the California Environmental Quality Act and California Coastal Act may have been well-intentioned, but far too often they can be abused by local NIMBYs (Not-In-My-Back-Yard) with more interest in keeping out new neighbors than preserving natural resources. A few NIMBYs with a bit of extra time on their hands can appeal countless permit approvals and demand additional environmental reviews — which can add months or years and hundreds of thousands of dollars to the permit approval process.
As SB 423 recognizes, the best solution is streamlining the permit approval process. Streamlining lays out simple, objective criteria, and guarantees permit approval if a project can meet those criteria. This incentivizes home-builders who might otherwise be wary of the cost and uncertainty of approval. Instead of a few large corporate developers building in planned communities, permit streamlining can encourage new home building by small “mom and pop”developers who might have only a single investment property. The easier the process becomes, the greater the effect.
In the past, permit streamlining laws have exempted the coastal region, leaving in place the restrictions of the California Coastal Act. But the Coastal Act is a large driver of housing costs in the Coastal Zone — the same area that already houses the vast majority of California’s population.
It makes sense to build housing in the spots where people want to live. And while the homes built closest to the coast may be relatively expensive, the downstream effect of new development is to lower the cost of all other units, ultimately opening up affordable units for rent and purchase.
This simply isn’t a problem that California can solve through tax and spend policies. The California Legislative Analyst’s Office estimates that it would take about $10 billion annually in renter’s assistance just to bring housing costs down to 50% of income for those currently paying more. The best solution is one that unlocks the potential in millions of undeveloped lots — as the YIMBYs (for YES-In-My-Back-Yard) often say, “build, baby, build!”
Some worry that increased development in the coastal region will harm sensitive environmental resources. But the reality is that most of the lots ready to be developed are lots that were long planned for residential use. Many are inside subdivided neighborhoods, where any impact will be minimal. And more fundamentally, residential development is not inconsistent with the careful management of environmentally sensitive areas. Indeed, often landowners have the most interest in maintaining a clean and attractive habitat on their property, and in avoiding negative impacts to the property itself.
To be sure, no one single law is to blame for the high cost of California housing, and no one single reform will be the solution. But in a state that needs millions of more homes to be built before the end of the decade, we should embrace all measures that will streamline the production of new housing. And it’s time to recognize that measures that exempt the coastal zone are often doomed to fail from the start. Hopefully SB 423 is a harbinger of things to come.
Jeremy Talcott is an attorney at Pacific Legal Foundation, a nonprofit legal organization that has defended Americans’ liberties when threatened by government overreach and abuse for the last 50 years.