Cities Aren’t Meeting Housing Goals, But New State Law Won’t Help Much

Hundreds of cities and counties across the state are going to have to make it easier to build new homes, says one state agency, if the housing supply is to keep up with demand. But it will never happen if politics continue to interfere.

The Department of Housing and Community Development’s statewide determination summary found that 378 jurisdictions will have to fast track their home construction approval process to comply with Senate Bill 35, one of several pieces of legislation passed last year to address the housing crisis. The law requires “localities that have failed to meet their regional housing needs” to untangle and accelerate their permit approval process.

Streamlining the homebuilding permit process is a critical component to easing the state’s housing crunch, in which a severe shortage of units has produced steep home prices that are unaffordable for many.

The construction approval process, a delay machine that creates a disincentive for developers to build, is one of the obstacles. Rita Brandin, a senior vice president with Newland, a San Diego developer, told Fox News that the process, from concept to permits, takes about a year and a half in fast-growing states such as Georgia, Texas and Florida. But in California, “just the process from concept to approvals, is five years — that does not include the environmental lawsuits faced by 90 percent of projects.”

Don’t expect SB 35 to produce a homebuilding boom, though. It has too many restrictions that will dilute its efficacy. The law does not require localities to streamline permits for single-family homes, homes in a coastal zone, and homes built on sites where rent-controlled housing, or “housing that has been occupied by tenants within the past 10 years,” once stood.

These limits are officialdom’s effort to stimulate construction of “affordable housing.” But the law is at war with itself, handcuffed by elements countering that stated objective.

One flaw in SB 35 is its requirement that developers must pay prevailing wages to take advantage of the streamlined permit process. California’s prevailing wage law, according to the state Department of Industrial Relations, requires employers to pay workers the “rate paid on public works projects to a majority of workers engaged in a particular craft, classification or type of work within the locality and in the nearest labor market area.”

Prevailing wages are typically union wage rates, which are not the products of market forces, but are politically and artificially inflated. This gift to the trade unions in SB 35 comes at the expense of greater home affordability, as it will cause homebuilding costs to increase. Some contractors will simply decide that working under those conditions won’t bring enough of a return to even bother to build more housing. Others will choose to build anyway, passing on to customers as much of their added costs as possible, making their homes less affordable.

Another flaw in SB 35 is its lack of a provision extending the streamlining to construction of single-family and coastal homes, which tend to be more expensive than the multi-family housing legislators are favoring, is shortsighted politics. Building homes across all prices ranges increases overall affordability. A 2006 report from the Legislative Analyst’s Office says all “new housing indirectly adds to the supply of housing at the lower end of the market” — which brings down prices — even though “new market-rate housing typically is targeted at higher-income households.”

It’s hard to believe those who supported SB 35 didn’t see how these provisions would weaken the law. It’s easy to believe that they did and willfully ignored its shortcomings for political purposes — namely shoring up their union support.

Either way, the bill is deeply flawed, even by California lawmaking standards.

The stonewall approval process at the local level has created an imposing barrier to home building. The LAO tells us that “many local communities have used” their authority to decide “when, where, and to what extent housing will be built” and “in ways that have constrained housing development.” Senate Bill 35 will provide some relief, but it won’t be as effective as a clean, less-political, and more civic-minded bill would have been. Legislators should try again in 2018.

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Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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