Despite recent attempts to reduce barriers to building in California, the housing sector remains hamstrung by excessive regulation. Ben Christopher writing at Cal Matters says there’s one bright spot in this otherwise dreary picture:
But unlike the vast majority of affordable developments that have been proposed in California in recent memory, no taxpayer dollars are allotted to build the thing. Especially in the state’s expensive coastal cities, the term “unsubsidized 100% affordable project” is an oxymoron, but Los Angeles is now approving them by the hundreds.
That’s thanks to an executive order Los Angeles Mayor Karen Bass, signed in December 2022, shortly after being sworn into office. In the year and change since, the city’s planning department has received plans for more than 16,150 affordable units, according to filings gathered by the real estate data company, ATC Research, and analyzed by CalMatters. That’s more than the total number of approved affordable units in Los Angeles in 2020, 2021 and 2022 combined.
This sort of outcome was completely unexpected:
“I don’t think anybody saw this coming,” said Scott Epstein, policy director at Abundant Housing LA and one of the authors of that analysis. “When it comes to 100% privately invested projects…I don’t think we’ve ever seen anything close to the magnitude that that has been unleashed.”
The key to success was reducing the regulatory burdens faced by developers of affordable housing units:
The order sets a shot-clock of 60 days for the city’s planning department to approve or reject a submitted project. As long as that project meets a basic set of criteria, it must be approved. That means no city council hearings, no neighborhood outreach meetings and no environmental impact studies required. . . .
Another key detail: Unlike most recent statewide laws aimed at speeding up the approval of new housing, the Los Angeles law doesn’t require developers to pay construction workers heightened “prevailing wages” — roughly equal to what unionized construction workers earn on a public infrastructure projects.
In the past those barriers were so burdensome that affordable housing could not be built in LA without large public subsidies. But the recent change unleashed a wave of new projects that are 100% privately funded.
Read the whole thing.
READER COMMENTS
steve
Feb 18 2024 at 9:00am
I tend not to worry or spend too much time on stupid stuff being done at the city/local level. Some stuff like LA housing policy will benefit some people for a while but it will eventually catch up to them and either people will keep having to move or they will change policy. Looks like they are changing policy and i would expect to se this spread.
Steve
robc
Feb 19 2024 at 10:15am
I am the opposite. The local level is where the stupid can be easily beat out.
If we could get more subsidiarity adopted, more and more important decisions would be made at the local level.
But you are also right, at that level it is more likely to be self-correcting. Which is even more reason for subsidiarity and focusing on that level, IMO.
David S
Feb 18 2024 at 12:23pm
I’ve been following the progress of housing permitting reform in California loosely over the past few years–partly thanks to you, M. Nolan Gray, Kevin Erdmann, and Marketwatch. I’m allowing myself some optimism, and not just for California, but for cities in the Northeast. Ideas can travel quickly, and although it’s going to take a lot of effort to unwind the craziness of Zoning Codes it’s encouraging to see models for success. What happened recently next door to me in Milton, Massachusetts is unfortunate, but it ain’t over till it’s over.
Bobster
Feb 19 2024 at 12:43pm
All the new California laws aren’t actually working.
They aren’t really deregulating any significant amount, and cities are offsetting state efforts with anti housing ordinances.
https://www.latimes.com/opinion/story/2023-05-05/california-housing-shortage-crisis-laws-reforms-rents-homes-homeless
Bobster
Feb 18 2024 at 5:19pm
Unfortunately these ED1 projects are all very low quality section 8 housing.
I’m also pretty sure they require prevailing wage. I have not read anywhere that ED1 suspends prevailing wage and not sure the mayor could suspend it considering state law.
The worse thing is this is causing massive delay in get market rate housing permitted. Market rate supply is what is truly needed.
But yes it does show how much the approval process lowered housing supply.
Bobster
Feb 19 2024 at 2:00pm
Correction: ED1 does not require prevailing wage. Only if they use public funding would they need to pay prevailing wage.
Jeff
Feb 19 2024 at 9:47am
On the topic of affordable housing, my understanding is that these units are approved on the basis of some spreadsheet that sets the rent at $X per month and makes the units available to people making less than Y*(area median income) per year. That is what makes them “affordable” and then some non-profit is typically contracted to administer a lottery to assign the units to interested parties.
My question is this: what happens if the market rent for those units falls below $X per month, at least for the addressable market for those units, which is the low-moderate income population? Do they sit empty while bureaucracy processes a petition to change the values of X and Y? For the “100% affordable” developments, is that a risk that developers must assume, thereby increasing costs?
For the “20% affordable” developments, on the other hand, I would assume those owners might actually be rather pleased if the calculated X & Y values inadvertently resulted in no takers for their “affordable” units. They might be happy to allow 20% of their building to sit empty to avoid mingling with riff-raff.
It seems like these can become reality unless $X is set dramatically below market, which from my cursory observations is rarely the case.
Bobster
Feb 19 2024 at 12:47pm
California is not in any danger of that happening due to very limited market rate development.
But I would think they can charge less. Those affordable rent amounts are the highest they can go I think
Jeff
Feb 21 2024 at 9:49am
In my neck of the woods I have seen evidence this is not in fact true, at least in the last few pandemic-influenced years, on the basis of repeated adverts for the same affordable housing units that were going begging because no one qualified wanted them.
It made me wonder if there is some unstated aspect to “affordable housing”.
For example, you could imagine a tony California town that brags about how it has many “affordable” apartments at $3k per month for workers making less than $100k per year (numbers hypothetical but not far from my recollection). And NIMBYs have no problem with this because they know that all the local service sector workers in that bracket either commute from lower cost areas or rent rooms for $1k per month. So the units will be empty and it’s all just a big racket that actually increases the cost of development.
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