California Housing: Building a More Affordable Future

California Housing: Building a More Affordable Future Report #267 | March 2022 Milton Marks Commission on California State Government Organization and Economy www.lhc.ca.gov LITTLE HOOVER COMMISSION Dedicated to Promoting Economy Pedro Nava, Chair and Efficiency in California State Sean Varner, Vice Chair Government Dion Aroner* David Beier The Little Hoover Commission, formally known as the Milton Asm. Tasha Boerner Horvath Marks “Little Hoover” Commission on California State Government Cynthia Buiza Organization and Economy, is an independent state oversight agency. Anthony Cannella** By statute, the Commission is a bipartisan board composed of Asm. Phillip Chen five public members appointed by the governor, four public Bill Emmerson members appointed by the Legislature, two senators and two Sen. Dave Min assemblymembers. Sen. Jim Nielsen Janna Sidley In creating the Commission in 1962, the Legislature declared its purpose: FORMER COMMISSIONERS WHO SERVED DURING THE ...to secure assistance for the Governor and itself in STUDY promoting economy, efficiency and improved services in the Asm. Chad Mayes transaction of the public business in the various departments, Asm. Bill Quirk agencies and instrumentalities of the executive branch of Sen. Richard Roth the state government, and in making the operation of all Cathy Schwamberger† state departments, agencies and instrumentalities, and all expenditures of public funds, more directly responsive *Served on study subcommittee to the wishes of the people as expressed by their elected **Did not serve during this study representatives... †Served as subcommittee chair The Commission fulfills this charge by listening to the public, COMMISSION STAFF consulting with the experts and conferring with the wise. In the Ethan Rarick, Executive Director course of its investigations, the Commission typically empanels Tamar Foster, Deputy Executive advisory committees, conducts public hearings and visits government Director operations in action. Krystal Beckham Ashley Hurley Its conclusions are submitted to the Governor and the Legislature Rachel Mattioli for their consideration. Recommendations often take the form of Sayed Murad legislation, which the Commission supports through the legislative Sherry McAlister process. Tristan Stein Contacting the Commission All correspondence should be addressed to the Commission Office: Little Hoover Commission 925 L Street, Suite 805, Sacramento, CA 95814 (916) 445-2125 | LittleHoover@lhc.ca.gov This report is available from the Commission’s website at www.lhc.ca.gov. Table of Contents EXECUTIVE SUMMARY ......................................................................3 INTRODUCTION .................................................................................5 THE PROBLEM ....................................................................................5 RECOMMENDATIONS AND DISCUSSION .......................................5 RECOMMENDATION 1: FOCUS ON AFFORDABLE HOME OWNERSHIP AND INCREASE SUPPLY .............................................8 Affordable Home Ownership Requires Sustainable State Investment .......................................................................................................9 RECOMMENDATION 2: CONSOLIDATE HOUSING FUNCTIONS ......................................................................................10 Goals and the Policies to Achieve Them at Cross Purposes .....................11 Elected Leaders Must Have Shared Vision .................................................12 Consolidation .................................................................................................13 RECOMMENDATION 3: JUMPSTART AFFORDABLE HOUSING PRODUCTION ....................................................................................13 Focused Working Group ...............................................................................13 Environmental Review..................................................................................14 RECOMMENDATION 4: FILL DATA AND ANALYSIS GAPS ............14 Data Gaps .......................................................................................................14 Technology .....................................................................................................15 Housing Policy Cannot Be Made with Anecdotes and Gut Feelings ........15 RECOMMENDATION 5: MEASURE PROGRESS .............................16 RECOMMENDATION 6: ENFORCE ACCOUNTABILITY ..................18 RECOMMENDATION 7: INVEST IN SHARED EQUITY MODELS .............................................................................................19 CONCLUSION ....................................................................................21 NOTES ...............................................................................................22 CALIFORNIA HOUSING: BUILDING A MORE AFFORDABLE FUTURE | 1 Letter from the Chair March 9, 2022 The Honorable Gavin Newsom Governor of California The Honorable Toni Atkins The Honorable Scott Wilk Speaker pro Tempore of the Senate Senate Minority Leader and members of the Senate The Honorable Anthony Rendon The Honorable James Gallagher Speaker of the Assembly Assembly Minority Leader and members of the Assembly DEAR GOVERNOR AND MEMBERS OF THE LEGISLATURE: Last year, the Little Hoover Commission initiated a review examining how the state and local relationship can be strengthened to increase the supply of affordable housing. The following report details the Commission’s research and recommendations. The Commission learned that California is short by two to three million homes to safely house its population. As a result of a limited supply, many Californians find themselves paying record prices for housing while others are priced out of the market entirely. The consequences of the state’s housing crisis are devastating. Many families have plunged into poverty, Californians are being pushed further away from their jobs, and others are thrust into crowded living conditions. In this report, the Commission offers seven targeted recommendations to address the state’s housing crisis. These recommendations are informed by the following themes: affordable home ownership, housing supply, cooperation with local government, addressing historical inequities and preventing new ones, and actions state leaders can take immediately. Too often, steps to address the state’s housing shortage are impeded by a lack of political will or by Californians themselves. The Commission’s recommendations seek to provide a pathway forward in tackling this pressing crisis. The Commission respectfully submits this work and standards prepared to help you take on this challenge. Sincerely, Pedro Nava, Chair Little Hoover Commission 2 | LITTLE HOOVER COMMISSION Executive Summary Letter from the Chair California is short by two to three million homes to Consolidate Housing safely house its population. As a result, Californians Functions are paying record prices for housing and far too many are finding themselves priced out of the The state’s housing departments are spread across market. four different agencies and divided under the purviews of the governor and the state treasurer. The implications of California’s housing crisis are This organization is inefficient, resulting in confusion devastating. The state’s poverty rate—when taking over responsibilities, service gaps, and a disconnect into account cost of living—is the highest in the between state goals and policies. Multiple elected nation. Californians looking for housing they can leaders must share the same housing vision in order afford are pushed farther away from their jobs, while to create a statewide strategy, adding an additional others are thrust into crowded living conditions. layer of complexity. Geography, population growth, policy choices, and To help the state craft a better affordable housing the behavior of institutional investors limit the strategy and improve operations, California availability of affordable housing. However, political should consolidate housing functions. The state will often stands in the way of tackling controversial should also consider formalizing a strategic issues to create long-term housing solutions. working relationship—either by the Legislature or Sometimes Californians themselves stand in the way through MOUs among agencies—between the two of development. constitutional officers and the agencies they oversee. In this report, the Commission outlines seven Jumpstart Affordable Housing recommendations that focus on issues that policymakers can work on immediately to address Production the state’s housing crisis. The Governor should jumpstart affordable housing Focus on Affordable Home production where it is needed most by treating California’s housing shortage with the same urgency Ownership and Increase as the state’s wildfire crisis. This includes creating Supply targeted working groups to tackle logistical and policy challenges within a defined period of time and State funding for affordable housing traditionally has building in CEQA flexibility to expedite projects. focused on rental housing. While it is critical that the state continue its support of renters, the Commission Fill Data and Analysis Gaps recommends that the state expand its affordable housing strategy, both in policy and funding, to put California lacks key pieces of information that would a greater focus on affordable home ownership. help state leaders better understand the housing To avoid implementing a strategy this is counter- crisis and potential solutions. Where data exists, it productive, this policy expansion must also include is not always clear how policymakers use it to make an emphasis on increasing housing supply. housing more affordable, and antiquated technology stymies progress. Technological problems are magnified at the local level, where some smaller jurisdictions struggle to afford useful technology. CALIFORNIA HOUSING: BUILDING A MORE AFFORDABLE FUTURE | 3 Using the best technology and methodologies Invest in Shared Equity available, California should identify data and Models analysis gaps. The state should transparently use that information in its policymaking. Tools should California’s long history of discriminatory housing be shared with local governments either at cost or, and property ownership policies has excluded groups preferably, for free. from home ownership. To make home ownership more accessible to a greater share of Californians, Measure Progress the state should invest in shared equity housing California’s process for determining how much and models, such as community land trusts. Under this where housing needs to be built fails to account model, the government or a nonprofit subsidizes the for how much housing, particularly affordable purchase of a home. In return, buyers agree to share housing, is actually built. Furthermore, under the a percentage of the home’s equity with the agency or current system, development is not planned where nonprofit that helped them purchase it. it is needed and is planned in locations that defeat To ensure the sustainability of its affordable housing California’s climate goals. investments, the state should specifically invest in The state should reconsider how it measures local shared equity models that require the unit be sold governments’ progress toward housing goals to at below-market prices. Furthermore, to ensure that include how many units are actually constructed residents are not stuck with a tax bill they cannot and how those units factor into California’s larger afford, the state should require these units to be climate goals. It may need to reconsider the Regional taxed at their resale-restricted value. Housing Needs Allocation process. Enforce Accountability The state lacks the tools it needs to effectively enforce local governments’ housing plans. To bolster enforcement under the current system, the state should create and fund an ombudsman position in every county with the authority to approve affordable housing projects when a local jurisdiction is noncompliant with its housing element. To proactively enforce housing requirements, the Governor should direct the Housing Accountability Unit within the Department of Housing and Community Development to develop reasonable standards for when the state should sue noncompliant localities. 4 | LITTLE HOOVER COMMISSION Introduction Many Californians think that the major housing policy problem is not lack of housing but keeping California “livable” i.e. unchanged for those who already have (own) a home. People who believe current laws and systems are working just fine, and that we should [consider] only no-impact housing, or that local control dominates all other considerations in the housing arena, oppose the types of systemic improvement in housing delivery proposed [in testimony]. To my neighbors who hold this view—yes, we live in wonderful place, but it is on all of us, in every neighborhood, to embrace change and do our fair share to house the next generation of Californians. If we refuse to accept the responsibility for the future of our children and our workers, then our “Golden State” will be for the “golden people”--wealthier and older homeowners who are cared for by a working underclass that is overcrowded, housing insecure, unable to buy a home, commuting long distances, and not happy about it. This is not the future California I want to leave to our children. Denise Pinkston, Founder and President The Casita Coalition The Problem California needs an additional 1.8 million to 3.5 The housing crisis results in Californians living farther million homes to adequately house its population.1 away from their jobs, resulting in longer commutes The Department of Housing and Community with more greenhouse gas emissions, and increased Development called for the construction of 180,000 building in areas prone to wildfire and other natural new units annually between 2015 and 2025 to close disasters. It has public health implications by forcing the gap. Instead, the state has averaged around Californians to live in more crowded conditions 80,000 new units per year.2 Prices go up when and impacting the mental health of Californians demand severely outpaces supply. vulnerable to losing their home.9 Further, housing insecurity contributes to feelings of hopelessness The consequences are devastating. California’s and social conflict.10 housing shortage has plunged many families into poverty that otherwise wouldn’t be. California’s Recommendations and poverty rate, at 11 percent, is on par with the Discussion national average when cost of living is not taken into consideration.3 When it is, California’s poverty The following themes inform the recommendations rate skyrockets to 17.2 percent – the highest in the in this report: nation.4 And in California, the cost of housing is the primary driver of the cost of living.5 This means that ◊ Affordable home ownership. Existing state programs primarily focus on helping the more more than 2 million Californians join the ranks of than 150,000 Californians without a home and those living in poverty. On average, they spend 50 affordable rental housing.11 The Commission percent or more of their income on housing.6 They believes it is critical that the state continue its must work an additional 50 days per year compared support of renters but asks the state to expand to average low-income Americans to meet basic its affordable housing focus to include more survival needs – food and shelter.7,8 affordable homeownership. CALIFORNIA HOUSING: BUILDING A MORE AFFORDABLE FUTURE | 5 ◊ Housing supply. California’s primary method traditionally have been excluded from it. Further, of helping homebuyers is with down payment it is imperative to avoid well-intentioned policies assistance. Without more homes, this simply that lead to negative consequences, such as results in buyers bidding up housing costs with displacement, going forward. the state’s backing as they compete for the same ◊ Actions state leaders can take immediately. homes. Government agencies, academia, journalists, ◊ Cooperation with local governments. The state industry insiders, and private citizens have makes laws, adopts statewide building codes, sets long sounded the alarm on California’s housing goals, and provides financial assistance, while local shortage. The problem is political will, largely governments decide “when, where, and to what informed by politicians’ constituents, particularly extent housing development will occur.”12 These the ones who are talented at raising money or separate functions highlight that cooperation is organizing votes for elected representatives – or essential. their opponents. California’s leaders know which controversial subjects must be tackled to create ◊ Addressing historical inequities and long-term housing solutions and that these will preventing new ones. California’s long history of take time: CEQA reform, Proposition 13 reform, a discriminatory housing and property ownership sustainable funding source, and a larger industry policies has had generational effects. The state workforce, among others. This report focuses on must acknowledge the long-term harm caused less-controversial actions the state can work on by these practices and invest in models of immediately. homeownership that reach Californians who Figure A: The Cost of Housing in California Has Increased at a Faster Rate Than Californians’ Incomes Median California Home Price and Median California Household Income 1984-2020, in 2020 dollars (in thousands). 800 800 700 700 660000 550000 440000 330000 200 200 100 100 0 0 Median Home Price Median Income Median Home Price Median Income Source: St. Louis Fed Alfred Archival Economic Data. https://alfred.stlouisfed.org. 6 | LITTLE HOOVER COMMISSION Figure B: The Consequences of High Housing Costs The Legislative Analyst’s Office (LAO) outlines the consequences of California’s high housing costs in its 2015 report, California’s High Housing Costs: Causes and Consequences. The many negative consequences include: CROWDING Californians are four times more likely to live in crowded housing than the average American. LAO statistical analysis found a correlation between crowding and a metropolitan area’s median home prices: As home prices go up, so does the likelihood of crowding. This matters because research shows that those who live in crowded conditions suffer increased levels of stress and aggression. Crowding weakens relationships between parents and children. Research suggests that crowding results in sleep disruptions, with harmful repercussions. Children living in crowded conditions have lower grades and test scores than their uncrowded peers, and have more behavioral challenges in the classroom. LONGER COMMUTES In order to afford housing, more California workers have adopted the “drive until you qualify” approach, increasingly living further away from their jobs. The LAO found that a 10 percent increase in a metropolitan’s median rent is correlated with a 4.5 percent increase in individual commute times. HARDER TO RECRUIT EMPLOYEES High housing prices mean that employers must pay higher wages to keep up with the cost of living. Additionally, higher housing costs can make it more challenging to recruit talented employees. In a Silicon Valley Leadership Group survey, nearly three-quarters of the C-Suite respondents identified employee housing costs as the top challenge for the region’s employers. STYMIED ECONOMIC GROWTH Large cities typically have higher economic growth than other areas, but this has slowed due to prospective workers not being able to afford to live in those cities. While we do not have California-specific data, a joint UC Berkeley and University of Chicago study found that the United States GDP is 13 percent lower than it would have been because of housing supply in large cities. Source: California Legislative Analyst’s Office. March 17, 2015. California’s High Housing Costs: Causes and Consequences. https://lao.ca.gov/ reports/2015/finance/housing-costs/housing-costs.pdf CALIFORNIA HOUSING: BUILDING A MORE AFFORDABLE FUTURE | 7 supply.13,14 The 2021-22 budget included $10.3 billion Recommendation 1 for the planning, production, and preservation California should expand its affordable housing of affordable housing.15 Governor Newsom has strategy, both in policies and funding, to place a requested an additional billion in the FY 2022-23 greater emphasis on affordable home ownership. budget, largely to support infill development and This policy expansion must include an emphasis redevelopment in cities.16 All of this funding is much on increasing housing supply. needed, but it primarily has been one-time funding and much of it reflects an unexpected budget Governor Gavin Newsom and the Legislature deserve surplus. Further, most state funding for affordable credit for a historic commitment to affordable housing traditionally has been for rental housing. The housing. Governor Newsom’s first budget allocated Commission believes the state should reorient its $1.75 billion to increase affordable housing focus to include more home ownership. NIMBYism Mr. Falk could see where this was going. There would be years of hearings and design reviews and The largest obstacle to creating more affordable historical assessments and environmental reports. housing, a reporter for the New York Times Voters would protest, the council would deny the concluded, is sociological. He described the project, the developer would sue. Lafayette would experiences and thought process of former get mired in an expensive case that it would likely Lafayette City Manager Steve Falk in 2012-13: lose. A developer had proposed putting 315 apartments Though Mr. Falk began his career as a local on a choice parcel along Deer Hill Road — close control advocate concerned with maintaining to a Bay Area Rapid Transit station, and smack in local character, he changed his views after the view of a bunch of high-dollar properties. […] years of working with housing advocates then Zoning rules allowed it, but neighbors seemed to watching his own children struggle to afford feel that if their opposition was vehement enough, housing. His newfound support of Governor it could keep the Terraces unbuilt. Brown’s threats to override local control in affordable housing in general and the Terraces In letters to elected officials, and at the open development project in particular led to a public microphone that Mr. Falk observed at the City rebuke from the City Council, an offer of a Council meetings, residents said things like “too sheriff’s escort for the Terraces representative aggressive,” “not respectful,” “embarrassment,” to safely reach her car following a City Council “outraged,” “audacity,” “very urban,” “deeply meeting, and Mr. Falk’s resignation. upset,” “unsightly,” “monstrosity,” “inconceivable,” “simply outrageous,” “vehemently opposed,” “sheer Source: Conor Dougherty. February 13, 2020. Updated February 12, 2021. “Build Build Build Build Build Build Build Build Build scope,” “very wrong,” “blocking views,” “does not Build Build Build Build Build.” New York Times. https://www. conform,” “property values will be destroyed,” and nytimes.com/2020/02/13/business/economy/housing-crisis- “will allow more crime to be committed.” conor-dougherty-golden-gates.html. Accessed August 10, 2021. 8 | LITTLE HOOVER COMMISSION “Homeownership is affordable housing,” testified are considered cost-burdened.21 Approximately 1.6 Debbie Arakel, executive director for Habitat for million of those households are considered severely Humanity California.17 She continued: cost-burdened, meaning they spend more than 50 percent of their income on housing.22 As a reference California’s investment is too low on production point, California’s top quartile of earners spend an overall, but undisputedly nearly all affordable average of 16 percent of their income on housing.23 production dollars go toward rental housing, with a tiny percentage for affordable homeownership. The state’s underinvestment For example, between CalHFA and Housing and in home ownership matters Community Development […] only one program because home equity is how exists to support affordable ownership production, the CalHome program. This is the one program most Americans build and pass where nonprofit affordable developers such as on wealth. Habitat for Humanity, can compete for funds. There are a few other programs that don’t explicitly exclude ownership housing, but program criteria A focus on affordable home ownership is counter- are specifically designed around rental production productive, however, without simultaneously and the scoring follows suit. Unfortunately, the increasing housing supply. California’s primary CalHome program is underfunded and woefully program for homebuyers is down payment oversubscribed by millions of dollars. During the last assistance. Without addressing the housing shortage, award cycle, the program was oversubscribed by Ms. Arakel testified, “The reality is that ‘would be’ low- 157 million [dollars], about three times the amount income buyers can’t find homes for sale in their price awarded.18 range and even with down payment assistance, they are simply driving up the home price, competing with The state’s underinvestment in home ownership other low-income buyers.”24 matters because home equity is how most Americans build and pass on wealth. The median net worth AFFORDABLE HOME OWNERSHIP REQUIRES of an American homeowner is $255,000, while the SUSTAINABLE STATE INVESTMENT median net worth of a renter is $6,300.19 Home California must create a steady funding source equity particularly is important for low-income to accompany a new focus on affordable home homeowners: It represents 81 percent of net wealth ownership. Former chief of HCD and California for the bottom quintile of earners, whereas at the top Housing Finance Agency (CalHFA) Claudia Cappio it comprises just 24 percent.20 testified that such funding “would enable the development of a more stable, long term housing Unlike rents, a standard fixed-rate mortgage will stay investment strategy, particularly when coupled with stable over time, freeing up more income for other other state revenue streams such as bonds, budget necessities, savings, and investment in the future as allocations and tax credits. It would also minimize the homeowner’s earnings, in theory, increase over the boom and bust cycle of housing bond funding time. A household that spends so much on housing where HCD, in particular, has to massively ramp up that it has difficulty affording other necessities is personnel and administration to get the funding considered cost-burdened. The threshold for this is out and then ramp back down when the program is 30 percent of a household’s income, and 3 million completed.”25 out of California’s roughly 13 million households CALIFORNIA HOUSING: BUILDING A MORE AFFORDABLE FUTURE | 9 Figure C: From the California State Auditor: Housing Roles and Responsibilities This graphic by the California State Auditor shows the primary agencies responsible for affordable housing and describes their roles. The Little Hoover Commission has altered the image to indicate which state agencies fall under the governor (grey) and which fall under the state treasurer (light blue). Source: California State Auditor. Report 2020-108. “California Housing.” http://www.auditor.ca.gov/pdfs/reports/2020-108.pdf that also work on housing. For example, the state’s Recommendation 2 Domestic Violence Housing First program, which The state should consolidate housing functions. helps survivors stay in their existing home or find This would increase efficiency, create a seamless new permanent housing, is located within the customer service experience, and help ensure Governor’s Office of Emergency Services. that more Californians live in safe, sustainable, The current organization is inefficient, results in and affordable housing. important service gaps, entrenches a disconnect The state’s housing departments are spread across between state goals and policies, and requires four different agencies. Additionally, the California multiple elected leaders to share the same housing Department of Veterans Affairs (CalVet) provides vision to create a statewide strategy. home loans to veterans. There are smaller programs 10 | LITTLE HOOVER COMMISSION Ms. Cappio testified to the inefficiency of the infill development and reduce distances Californians current organization by breaking down the agencies drive to work.27 However, dense infill development responsible for three major tools of home finance often is opposed by current residents, who are – debt, equity, and subsidy – as well as asset concerned about traffic, the loss of open space and management, which involves monitoring the assets other issues. Furthermore, infill development is each agency manages and reporting to state and often so expensive that only well-off Californians can federal government primarily on physical condition, afford to pay market rates. Denise Pinkston, partner tenancy, and financial audits. Figure D depicts her with San Francisco-based developer TMG Partners, description. testified: “Modern mid-rise (4+ floors) buildings are complex. They incorporate costly concrete parking With similar functions spread across so many structures and require generators, fire life safety agencies, there can be confusion over responsibilities systems, elevators, and full ADA systems that are that results in service gaps. Ms. Arakel testified not required for much lower density stick frame and that HCD staff, “shared that their role is to promote single-family homes. It costs over $700,000 PER UNIT affordable housing which they interpret as rental in much of California to build a mid-rise apartment housing. Furthermore, they expected that CalHFA home,” she explained.28 was fully addressing ownership housing needs.” However, she testified, “CalHFA members expect that Consequently, local opposition to new housing ownership production is being funded by HCD.”26 and the expense of infill development combine to result in increasing numbers of homeowners GOALS AND THE POLICIES TO ACHIEVE living increasing distances from their jobs, which is THEM AT CROSS PURPOSES inconsistent with California’s climate change focus. California’s leaders have made adapting to climate A 2019 UCLA study on planned housing capacity change a key policy priority. Toward that end, leaders quantified this. Busy coastal metropolitan areas have called for state housing policy to focus on dense Figure D: Some Housing Functions Are Performed by Multiple Agencies DEBT EQUITY SUBSIDY ASSET MANAGEMENT CalHFA: California Housing Finance Agency HCD: Housing and Community Development Dept. CDLAC: California Debt Limit Allocation Committee CSD: Community Services and Development Dept. TCAC: California Tax Credit Allocation Committee CalVet: California Dept. of Veterans Affairs Source: Claudia Cappio, Former Local Planning Official and Former Director, California Housing Finance Agency and Former Director, Housing and Community Development (2011-2015). September 23, 2021. Written testimony to the Commission. Page 1. CALIFORNIA HOUSING: BUILDING A MORE AFFORDABLE FUTURE | 11 Figure E: UCLA Research Shows Mismatch Between Planned Housing Capacity and Needs Difference between population and share of statewide planned housing capacity share by region Population and planned housing capacity share by region Northern California Population Planned Region Difference Share Capacity Share Bay Area 20.3% 13.3% -7.0% Central Coast 3.1% 1.7% -1.4% Sacramento Central Sierra 0.5% 0.8% 0.3% Valley Inland Empire 11.5% 17.5% 6.0% Northern California 1.4% 3.6% 2.2% Sacramento Valley 7.6% 9.1% 1.5% San Joaquin Valley 10.6% 21.7% 11.0% Southern Border 8.9% 8.3% -0.5% Bay Area Southern California 36.2% 24.1% -12.1% Central Sierra Santa Clara County -2.2% San Joaquin Central Valley Coast Kern County +7% San Bernardino County +3.2% Southern Inland California Empire -5.6% -2.5% -1% 1% 2.5% 7% Los Angeles Riverside County County +2.8% -5.5% Orange Southern Border California Regions County -5.6% IMAGE REPRODUCED FROM ORIGINAL SOURCE: UCLA. February 2019. “Not Nearly Enough: California Lacks Capacity to Meet Lofty Housing Goals.” https://www.lewis.ucla.edu/research/california-lacks-capacity-to-meet-lofty-housing-goals/. overwhelmingly are not planning housing that meets both are independently elected officials, a statewide their population needs, while inland areas appear to strategy for affordable housing requires both officials be planning for a population influx.29 to share the same vision for housing. To be clear, the Commission is not remarking on the relationship ELECTED LEADERS MUST HAVE SHARED between the current governor and state treasurer, VISION but highlighting a structure that is difficult under Housing functions are divided among agencies under the best of circumstances. No matter how good the the purviews of the governor and state treasurer. As 12 | LITTLE HOOVER COMMISSION relationship between a governor and state treasurer, ◊ Requiring stakeholders to identify the areas voters can change either or both of those office in which affordable housing is most urgently holders every four years. It is challenging enough needed and, issuing executive orders if to craft a decades-long strategy that will survive necessary, completing projects meeting those policymaker turnover; adding another constitutional needs within a defined period of time. officer to the mix makes it that much harder. ◊ Building in CEQA flexibility to expedite the projects. At a minimum, the state should With similar functions spread require CEQA challenges to be resolved within a year – a provision it has adopted in the past across so many agencies, to quickly build sports arenas. A team should there can be confusion over be assigned to monitor these processes, identify pain points and best practices, and responsibilities that results in make recommendations to the Governor and service gaps. Legislature on how to roll this out statewide. California’s housing shortage should be treated with CONSOLIDATION the same urgency as the state’s wildfire crises. The At a minimum, the state would benefit from difference between the two is that the devastating functional consolidation across state agencies. effects of wildfire on people, homes, the economy, Consolidating the functions Ms. Cappio detailed at and the environment can be seen immediately, the beginning of this section would allow the state to whereas similarly devastating effects caused by the better create an affordable housing strategy, improve housing shortage are slower to appear. Further, everyday operations, and streamline the process for wildfire does not discriminate, while wealthier developers interested in affordable housing.30 Californians are able to distance themselves from the immediate impacts of the housing shortage. The state should also consider formalizing a strategic working relationship between the two constitutional FOCUSED WORKING GROUPS officers and the agencies they oversee. This could be The Commission urges the state to adopt for housing done by the Legislature or through MOUs between the model it uses to combat high-intensity wildfires. the agencies. A sunset clause would allow for a In it, state task forces assigned stakeholders from all reassessment of how this has worked. Californians levels of government and outside of government to deserve the benefits that a cohesive strategy and working groups identifying logistical and regulatory consolidated functions would provide. challenges and proposing solutions to create resilient forests. Far from being death by committee, these Recommendation 3 task forces had set goals, meetings, and deadlines to report their results. Governor Newsom supercharged The governor should jumpstart affordable this effort by ordering CAL FIRE to identify potential housing production where it is most needed by projects in the areas of highest need, then adopting the model used to attack California’s declaring a state of emergency to complete the wildfire crises. This includes: 35 identified projects within a year. This entailed ◊ Assigning key stakeholders to working groups suspending procurement rules, state statutes and to tackle logistical and policy challenges regulations, including CEQA (with the cooperation within a defined period of time. of the California Natural Resources and California CALIFORNIA HOUSING: BUILDING A MORE AFFORDABLE FUTURE | 13 Environmental Protection Agency Secretaries), and over the nearly three-year planning process. Lenders adjusting workforce licensing requirements, among pulled their funding commitments because the other provisions.31,32 developer could not prove that it could repay them under the new market conditions, and the project The Commission believes a similar approach would died.34 galvanize state efforts to combat the affordable housing crisis. It suggests using the UC Berkeley Recommendation 4 Terner Center’s analysis of the costs of construction as a starting point when creating working groups.33 California must identify data and analysis gaps Funding to participating state agencies should be that prevent its leaders from fully understanding increased to account for the additional workload, the housing crisis and potential solutions. It while grants should be provided to organizations should collect and analyze that data using the outside of state government so they can afford to best available technology and methodologies, participate. and share those tools with local governments either at-cost, or preferably, for free. Finally, it ENVIRONMENTAL REVIEW should transparently use that information in The Commission recommends the governor its policymaking. Identified areas of concern assign a team to monitor the impacts of relaxed include development fees, mass home purchases CEQA application. This team should create by institutional investors, and the cumulative recommendations for the administration and impact of laws and regulations on the cost of legislature on permanently adjusting those laws and housing. processes to hasten affordable housing production while also protecting the environment. California has a data problem. While four different housing agencies collect and report certain data, The latter is necessary because CEQA often is used decision-makers lack key pieces of information that beyond its original scope to kill housing projects. For would provide a complete picture of the housing example, the Commission learned of a proposal that crisis and potential courses of action. Where data would create 300 units of high-rise housing next to does exist, it is not always clear how policymakers public transportation. The developer agreed to use use it to make housing more affordable. Additionally, union labor and pay $20 million to the community some of the state’s own technology is antiquated and to be used for affordable housing and mitigate the local governments do not always have the means impacts of construction. The environmental impact to apply state-of-the-art technology to their data review (EIR) process included 35 public hearings collection, planning, and implementation processes. spanning two years. The proposed project was put on DATA GAPS the ballot twice, and both times the region’s residents voted in favor of it. The city council approved the Development Fees. Development fees are an project. After the project was approved, however, important example of missing data. No one has a an individual filed an EIR lawsuit claiming the nearby complete list of fees and what they are used for public transportation did not have the capacity to in every jurisdiction. The Terner Center conducted accommodate the additional people the high-rise a seven-city analysis of development fees and would serve, and that the EIR had not properly a 40-jurisdiction study on impact fees, a subset analyzed this. The court rejected the lawsuit nine of development fees; their subsequent reports months later, but the housing market had shifted described a shocking lack of transparency. Though some cities provide an option to calculate some 14 | LITTLE HOOVER COMMISSION or all development fees up front, in other major owned homes belong to individuals, and which metropolitan areas, such as Oakland and Los are owned by institutions. In 2018, the Legislature Angeles, developers only learn what fees were enacted a law that would require a registry of the charged when they’re billed after the project is largest institutional investors, but Governor Brown complete.35 These types of fees can add more than vetoed it, saying that a database would not stop the $150,000 to the cost of a home on top of land, labor, problem.39,40 A second attempt that also included a materials, and other expenses.36 State government tax died in committee in 2021.41 cannot combat the housing crisis without knowing The Commission believes that additional data is how much it actually costs to build housing. needed to assess this problem. In order to craft a Institutional Investors. Another important example policy solution, the state must first know the size and of missing data is the impact of institutional investor scope of the problem. home purchases on the housing crisis. Since the TECHNOLOGY Great Recession, financial institutions have snapped The state needs to upgrade some of its housing- up single-family homes worldwide to rent or hold related technology. Former state housing director onto until property values increase. They first Ben Metcalf testified that the state’s current IT targeted foreclosed homes, though since then many platform for tracking local government housing have developed systems to evaluate all homes on element compliance – the Housing Element Tracking the market. It is difficult for individual homebuyers Systems – is antiquated. The system “does not to compete with institutions. One company prides currently offer a robust system for tracking and itself on being able to analyze all homes in a targeted flagging failures of cities and counties to achieve the area within 15 minutes of appearing on the Multiple programmatic commitments incorporated into their Listing Service, and make a cash offer on homes that Housing Elements.”42 meet its criteria within two hours.37 The state’s technological problems are magnified State government cannot at the local level, where many smaller jurisdictions struggle to pay for software and other helpful combat the housing crisis technology. At a minimum, the state should use its without knowing how much it bulk purchasing power to buy tools, such as GIS software licenses, at a lower cost than a small local actually costs to build housing. government would be able to negotiate on its own, then provide it at-cost to local jurisdictions. However, The extent of institutional investment and the impact because local governments are instrumental in of the state’s housing market is controversial, with facilitating housing, and the housing shortage is so some saying it is a serious problem and others severe, the Commission believes California would saying there are so few investor-owned homes that be best served if the state completely subsidized it doesn’t warrant policymaker attention. Part of the appropriate technology for local governments. problem is that county assessor information isn’t very HOUSING POLICY CANNOT BE MADE WITH useful in determining who owns a home: Many older ANECDOTES AND GUT FEELINGS homeowners place their home in a trust to make it Once the state has good data, it must use it easier for their children to inherit, and it is common effectively in making policy. An important area where for smaller landlords to incorporate as LLCs.38 There the intersection of data and technology can aid is no easy way to separate out which corporation- CALIFORNIA HOUSING: BUILDING A MORE AFFORDABLE FUTURE | 15 decision-making is the cumulative impact of laws and individual jurisdictions, and those jurisdictions regulations on housing development. “Estimating must prove in the housing element portion of their the likely impact of specific housing policy changes General Plan that they have “adequate capacity of has historically been an anecdotal undertaking,” Mr. developable sites” to meet their share. There is no Metcalf testified. “To the extent analyses of specific standardized definition of adequate capacity.46 housing regulations have been modelled, such as housing impact fees or parking requirements, such A housing allocation process models typically focus on one policy at a time. In that fails to account for how reality, land use and housing policies interact with one another to influence the likelihood of residential much housing is actually built development.”43 is fundamentally flawed. Mr. Metcalf described a tool created by the Terner Center that aggregates the impact of housing policies Missing from this process is accountability for how down to the parcel level. Users can see changes much housing, particularly affordable housing, is under different market conditions. The tool allows actually built. users to understand the “likely probability of new housing development under different scenarios” and The advantage of the current system over focusing the underlying constraints inhibiting development.44 on units built is that is that zoning is within local Mr. Metcalf concluded, “Some policy interventions jurisdictions’ control, whereas local governments that policymakers and advocates prefer may yield can’t force developers to build. Because a method of counterintuitive results – sounding good in theory measurement is easier, however, does not make it but resulting in a trivial, or even negative, change in useful. developable parcels. While no model can perfectly predict future development activity, policymakers’ A housing allocation process that fails to account for decision-making processes should be based on the how much housing is actually built is fundamentally best evidence and analysis available.”45 flawed. The state’s evaluation of local governments’ progress toward housing goals should include how Recommendation 5 many units are actually constructed. The state should reconsider how it measures local The state also should prioritize redevelopment and governments’ progress toward housing goals to infill development to be consistent with larger climate include how many units are actually constructed goals. Under the current system, development is and how those units factor into California’s larger not planned where it is needed and is planned in climate goals. locations that defeat California’s climate goals. Figure G shows the process conducted by the state The state also must consider its own actions when and regional governments to determine how much assessing those of local governments. If the state and where housing needs to be built. This is called with all its resources cannot subsidize costly infill- the Regional Housing Needs Assessment (RHNA). In and redevelopment, how can it expect smaller local short, HCD assigns each region an estimate of how governments to do so? many units need to be built over the next eight years to meet current population needs plus forecasted Higher-accuracy planning that focuses on growth. Regions divide that estimate among development where it is needed and takes into 16 | LITTLE HOOVER COMMISSION Figure G: Affordable Housing: The State and Local Process (A Layperson’s Guide) HCD COG LOCAL Determines Regional Housing Divvies up the housing GOVERNMENTS Needs Assessment. needs among the Update Housing HCD AND COG region’s individual Element of general Incorporate COG’s figures jurisdictions via the plan to reflect new into final Assessment. Regional Housing RHNA share, submit COUNCIL OF Need Allocation to HCD. GOVERNMENTS (COG) (RHNA) Plan. Prepares its own assessment of regional housing needs. LOCAL GOVERNMENTS LOCAL GOVERNMENTS HCD Submit Annual Progress Adopt Housing Element as Reviews and certifies Report (APR) to HCD and OPR. part of their General Plan. Housing Element. HCD Reviews APR as well as any evidence that a local government is not in compliance with the Housing Element. HCD (If non-compliant) Works with local government (If still non-compliant) to attain compliance. HCD ATTORNEY GENERAL Decertifies Housing Element and No action required. may notify Attorney General. GLOSSARY develop and manage conservation, housing, land use, open Annual Progress Report: Annual reporting of a jurisdiction’s space, noise, safety, and transportation. progress in fulfilling its Housing Element. HCD: California Department of Housing and Community Assessment: The determination of how much housing and at Development. what affordability levels a region needs to meet the needs of the people who live there. Housing Element: Component of General Plan that includes an analysis of a jurisdiction’s housing needs for all income Council of Governments (COG): City and county levels and its plan to meet those needs. governments within a region that meet to determine regional housing needs. Local Governments: City and county governments. Decertification: Local governments may lose control over OPR: Office of Planning and Research. approval of affordable housing projects if stakeholders pursue a court order. Regional Housing Need Allocation (RHNA) Plan: The plan that outlines the new housing quantity and price points General Plan: A local government’s blueprint on how it will assigned to each jurisdiction within a region. CALIFORNIA HOUSING: BUILDING A MORE AFFORDABLE FUTURE | 17 consideration the state’s actions likely would require when a locality is in noncompliance usually is redesigning or scrapping the current RHNA process. to obtain a court order requiring the locality to The first use of the current process began in 1969 issue the document. However, developers can be after the state enacted a law requiring cities to plan reluctant to take local governments to court over for their community’s housing needs at all income affordable housing because they will need to work levels. More than 50 years later, California is short with them in the future on other more profitable by two million to three million homes, the home projects. Further, California’s court systems are ownership rate is at the lowest level since the 1940s, notoriously overwhelmed. To mitigate this, the and housing costs have plunged more than two Commission recommends the state create in each million Californians into poverty. The system must be county a housing ombudsman who has the authority changed. to approve affordable housing projects until a noncompliant locality is recertified. Because there are Recommendation 6 several hundred jurisdictions throughout California that can add their own building requirements to The state should better enforce its housing the state’s, these ombudsmen should be required requirements by creating and funding an to adhere only to the statewide codes set by ombudsman position in every county with the the California Building Standards Commission. authority to approve affordable housing projects Exceptions can be made for evidence-based local when a local jurisdiction is noncompliant with codes proven indispensable for health and safety. its housing element. Additionally, the governor should direct the Housing Accountability Unit within the Housing and Community Development The state lacks the tools it Department to proactively enforce housing needs to effectively enforce requirements and develop reasonable standards housing elements. for when a case should be brought to the state’s Department of Justice to sue noncompliant localities. HCD has long enforced housing elements by writing letters to cities cautioning them that their actions The state lacks the tools it needs to effectively might violate state housing law. It largely has relied enforce housing elements. Though the Commission on third parties to inform it of violations. The state argues for reworking the current RHNA/housing may sue localities violating its housing requirements. element approach, in the meantime the state must However it has only done so once in the past decade. be able to enforce its current system. HCD may Consequently, the Commission recommends the decertify a housing element and notify the Attorney department’s newly-created Housing Accountability General, but a provision requiring the Attorney Unit develop reasonable standards for when the General to sue noncompliant localities was stripped state should sue noncompliant localities. The state from the decertification bill. A different bill that would should focus its enforcement on jurisdictions whose have given the state the power to fine noncompliant annual rates of permitting are lagging. Whether localities did not pass.47 a jurisdiction is lagging should be determined by Decertification means a local jurisdiction loses comparing their permitting rate to their assigned the ability to deny permits for certain types of targets, and by statistical models that use affordable housing until it is back in compliance. comparable jurisdictions to predict an approval The process to “automatically” receive a permit rate.48 18 | LITTLE HOOVER COMMISSION limited certain areas to white residents.49 (In 2021, Recommendation 7 Berkeley voted to eliminate single-family zoning.) To help lower- and middle-income Californians Government-sanctioned racism has been the norm become homeowners, prevent displacement, and since statehood, not the exception. Early laws preserve its affordable housing investments, the barred Asian people from owning land. Redlining state should invest in shared equity models such effectively limited the availability of mortgages to as community land trusts. As part of this effort, predominantly white areas. The state constitution California should: was changed to allow communities to vote on ◊ Place a particular emphasis on the whether publicly-funded low-income housing may be participation of individuals from groups constructed there. In these and other ways, people of historically excluded from home ownership. color have long been denied equal housing access in California. Many laws were changed in the aftermath ◊ Tax all resale-restricted housing at the resale- of the civil rights movement to remove explicitly restricted value. racist language from housing statutes, but racism ◊ Require state-funded shared equity housing persisted in practice: Real estate agents directed to be sold below market value in order to buyers and renters to the “right” neighborhoods; preserve the state’s affordable housing lenders targeted people of color during the subprime investment. mortgage crisis; and even today there is evidence that black-owned homes are appraised lower than Groups that historically have been excluded from white-owned homes when all else is held constant.50 home ownership or forced into low-value areas are Today, about 63 percent of non-Hispanic white hit particularly hard by California’s high housing costs families own their home in California, compared to because they have been denied the generational 36 percent of black households.51 wealth-building opportunities afforded to other Californians. The state can make housing accessible to a greater share of Californians by investing in shared The state’s racist history regarding home and equity housing. In this model, the government or property ownership is plain. One example is a nonprofit subsidizes the purchase of a home, Berkeley’s adoption of the state’s first single-family allowing lower-income buyers to buy a home without home zoning law. In the early 1900s, developer taking on the risky mortgages that preceded the 2008 Duncan McDuffie built neighborhoods with racial housing crash. In return, buyers agree to share a covenants that prohibited people of color, a common percentage of the home’s equity with the agency or practice at the time. He worried about people of nonprofit that helped them purchase it. The contract color moving to nearby neighborhoods without such between homebuyers and subsidizers delineates restrictions, and was alarmed at the prospect of a the formula that determines the resale value of the black-owned dance hall moving to the area, as it likely home. For example, the resell value of the home may would attract black people. Working with like-minded increase by three percent a year, with a homebuyer civic leaders, in 1916, he successfully pushed for his receiving a larger percentage if they make capital city to adopt a single-family zoning law. That measure improvements. kept the dance hall out. Because racism artificially depressed the wages of non-white workers, prices for A critical benefit of the shared equity model is that it single-family homes were above what most people can help prevent displacement through gentrification of color could afford, thus the zoning also effectively CALIFORNIA HOUSING: BUILDING A MORE AFFORDABLE FUTURE | 19 Community Land Trusts: Hurricane Irma, and builds homes designed to withstand future hurricanes on them. This One Model of Permanent could be a model for recovery following natural Affordable Housing disasters in California. Community Land Trusts (CLTs) tackle the Californians should be proud of how CLTs most expensive component in California already are working to extend homeownership homebuilding: land. A nonprofit or government to people traditionally excluded from those organization buys land, puts it into a trust, then opportunities: Nearly 80 percent of CLT sells the homes on the land for below-market participants in California are people of color. value. The buyer agrees to resell it at a below- market rate. The land underneath the home The success of resale-restricted housing remains the property of the trust, which offers depends on taxes that reflect how much the low-cost leases to homeowners. Homeowners home can be sold for instead of the market typically are required to participate in the CLT’s value of nearby properties. Legislation largely governance. has focused on reducing the tax burden for CLTs serving low- and moderate-income people. The CLTs are being used in innovative ways. Los Commission commends this step but believes Angeles-based Fideicomiso Comunitario Tierra the state must go further. Given California’s Libre helps residents in Boyle Heights and housing costs, many people whose earnings East Los Angeles at risk of being displaced. exceed the definition of moderate income Working with nonprofits, residents created cannot afford a home and would benefit from a the CLT, which has purchased empty lots and shared-equity model with appropriate tax relief. a multifamily building for affordable housing. We recommend limiting the tax burden to the Working with four other Los Angeles-area CLTs, resale-restricted rates of all applicable shared- they won $14 million from a Los Angeles CLT equity models, not just CLTs serving low- and pilot program to expand their work. In addition moderate-income people. to empowering residents to stay in their community, the CLT has helped residents have a Sources: Fanny Ortiz, Co-Founder and Board Member, Fideicomiso Comunitario Tierra Libre, and Treasurer, voice in their community’s future. California Community Land Trust Network. August 26, 2021. Testimony to the Commission. Also, Leo Goldberg, Co-Director, CLTs offer other opportunities. The Irvine California Community Land Trust Network. August 23, 2021. Community Land Trust helps the city meet Phone call with Commission staff. Also, Katherine McKeen. climate change goals: It is building expensive February 17, 2021. “Community Land Trusts Get a California Makeover.” University of Pennsylvania Law School. https:// infill housing designed to be affordable and www.theregreview.org/2021/02/17/mckeen-community-land- environmentally sustainable. A portion of trusts-get-california-makeover/. Accessed February 23, 2022. this housing is reserved to help Californians Also, Jessica Grannis. March 2020. “Community-Driven Climate experiencing homelessness and mental Solutions: How Public-Private Partnerships with Land Trusts Can Advance Climate Action.” William and Mary Environmental Law illness. In Florida, the Florida Keys Community and Policy Review 44:3 (2019-20). Pages 701-744. Land Trust acquires properties destroyed in 20 | LITTLE HOOVER COMMISSION pressures by helping residents purchase homes in result? Local governments impose development the neighborhood in which they already live. Not fees on new construction, in some cases adding six coincidentally, these are the same neighborhoods figures to the cost of each unit.53 Another example is where many historically-excluded Californians CEQA, created to protect California’s environment. It reside.52 has been weaponized by some not to protect critical habitats, but to prevent construction that they would Often, homeowners who receive government find annoying. assistance in purchasing their home later sell it at the market rate. To ensure the sustainability of its Other factors also limit the availability of affordable affordable housing investments, the state should housing. Worldwide, corporations are buying homes, specifically invest in shared equity models that often in large lots, that they can later rent or flip. require the unit be sold at below-market prices. A first-time homebuyer, often cobbling together Further, the state should require these units to be financing from a variety of sources that could fall taxed at their resale-restricted value; it does no good through, isn’t as attractive to sellers as a large to assist a lower-income Californian to purchase corporation offering cash. a home in an expensive metropolitan area if they The cumulative impact of such laws, policies, and receive a tax bill for the market value of the home. behavior, plus conditions outside of Californians’ Finally, the state must take care to ensure that these control, is that developers cannot build homes that opportunities are presented to those who have the median-income Californian can afford – even if previously been hurt by discriminatory policies and they were willing to sell at cost. practices. While we cannot change the past, we do have the power to change the present and future if Finally, Californians themselves impede the we so choose. availability of affordable housing. Often referred to as NIMBYs, meaning not in my backyard, these Conclusion Californians – typically existing homeowners – California does not have enough homes to safely bemoan the state’s housing shortage but actively house all of its residents. As a consequence of this oppose new development, particularly the affordable limited supply, market-rate homes are unattainable kind, in their community. Some concerns deserve for many Californians. serious attention, such as whether a community’s infrastructure can keep pace with an expanding To some degree, this limited supply is a result of population. Others are barely-concealed bigotry increased demand caused by decades of population and selfishness. Homeowners often oppose more growth. It is also sometimes the result of natural housing as they watch their own property values conditions, such as limitations to the water supply increase due to limited supply. Still other people or the fact that many large metropolitan areas in prefer their community exactly as it is. They do not California are near the ocean and/or mountains. see it as their problem if the teachers, utility workers, nurses, firefighters, and myriad others who serve But the high cost of housing also is the result of their community are not able to live there. policy choices. Examples include California’s 1978 Proposition 13, which limits property taxes for It is, however, their problem. It is one for all homeowners. In effect, the initiative stripped local Californians. governments of revenue needed to provide the services their constituents still demanded. One CALIFORNIA HOUSING: BUILDING A MORE AFFORDABLE FUTURE | 21 Notes 1. California Department of Housing and www.census.gov/content/dam/Census/library/ Community Development, Division of Housing publications/2020/demo/p60-272.pdf. Accessed Policy. February 2018. “California’s Housing February 17, 2022. Also, Sara Kimberlin and Future: Challenges and Opportunities Final Esi Hutchful. California Budget & Policy Center. Statewide Housing Assessment 2025.” Page 5. September 2019. Updated October 2019. “New https://www.hcd.ca.gov/policy-research/plans- Census Figures Show Many Californians Struggle reports/docs/sha_final_combined.pdf. Accessed to Afford Basic Needs.” https://calbudgetcenter. February 17, 2022. Also, McKinsey & Company, org/resources/new-census-figures-show-many- McKinsey Global Institute. October 2016. “A Tool californians-struggle-to-afford-basic-needs/. Kit to Close California’s Housing Gap: 3.5 Million Accessed February 17, 2022. Homes by 2025.” https://www.mckinsey.com/ 5. Dan Walters. September 20, 2020. “High Housing featured-insights/urbanization/closing-californias- Costs Keep Californians Poor.” CalMatters. housing-gap. Accessed February 17, 2022. https://calmatters.org/commentary/2020/09/ 2. California Department of Housing and high-housing-costs-californians-poor-poverty/. Community Development, Division of Housing Accessed February 17, 2022. Also, SoFi. December Policy. February 2018. “California’s Housing 2021. “Cost of Living in California.” https://www. Future: Challenges and Opportunities Final sofi.com/cost-of-living-in-california/. Accessed Statewide Housing Assessment 2025.” Page 3. February 17, 2022. Based on data from The https://www.hcd.ca.gov/policy-research/plans- Council for Community and Economic Research. reports/docs/sha_final_combined.pdf. Accessed ACCRA Cost of Living Index. https://www.coli.org/ February 17, 2022. (Paywall). 3. United States Census Bureau. September 14, 6. California State Auditor. November 2020. 2021. “Percentage of People in Poverty by State “California’s Housing Agencies.” Report 2020- Using 2- and 3-Year Averages: 2017-2018 and 108. Page 9, Figure 3. http://auditor.ca.gov/pdfs/ 2019-2020.” https://www2.census.gov/programs- reports/2020-108.pdf. Accessed February 17, surveys/demo/tables/p60/273/PercentageInPov_ 2022. state.xlsx. Accessed February 17, 2022. Part of 7. Sarah Bohn and Caroline Danielson. Public Policy Income and Poverty in the United States: 2020. Institute of California. November 2017. “Reducing Available at https://www.census.gov/library/ Child Poverty in California: A Look at Housing publications/2021/demo/p60-273.html. Costs, Wages, and the Safety Net.” Page 5. https:// 4. Dan Walters. September 20, 2020. “High Housing www.ppic.org/wp-content/uploads/r_1117sbr. Costs Keep Californians Poor.” CalMatters. pdf. Accessed February 17, 2022. https://calmatters.org/commentary/2020/09/ 8. At current minimum wage of $15 per hour and an high-housing-costs-californians-poor-poverty/. 8-hour workday. Accessed February 17, 2022. Also, United States Census Bureau. September 2020. “The 9. During the pandemic, crowded conditions have Supplemental Poverty Measure: 2019. Appendix posed a health risk for families, especially for low- Table 5: Number and Percentage of People in income people and people of color, who often Poverty by State Using 3-Year Average Over: live in the most crowded conditions. 2017, 2018, 2019.” P60-272. Page 29. https:// 22 | LITTLE HOOVER COMMISSION 10. Denise Pinkston, Founder and President, The 16. California Department of Finance. Governor’s Casita Coalition, and Partner, TMG Partners. Proposed California Budget 2022-23. Budget August 26, 2021. Written testimony to the Summary: Housing and Homelessness. Pages Commission. Page 9. Available on Commission 142-145. https://ebudget.ca.gov/2022-23/pdf/ website. BudgetSummary/HousingandHomelessness.pdf. Accessed February 17, 2022. 11. Debbie Arakel, Executive Director, Habitat for Humanity. August 26, 2021. Written testimony 17. Debbie Arakel, Executive Director, Habitat for to the Commission. Page 10. Available on Humanity. August 26, 2021. Written testimony Commission website. Homelessness data to the Commission. Page 6. Available on from the United States Interagency Council Commission website. on Homelessness. “California Homelessness 18. Debbie Arakel, Executive Director, Habitat for Statistics.” https://tinyurl.com/mr3hnr25. Humanity. August 26, 2021. Written testimony Accessed February 17, 2022. to the Commission. Page 10. Available on 12. Legislative Analyst’s Office. March 17, 2015. Commission website. “California’s High Housing Costs: Causes and 19. Federal Reserve Bulletin. September 2020. Vol. Consequences.” Page 15. https://lao.ca.gov/ 106, No. 5. “Changes in U.S. Family Finances reports/2015/finance/housing-costs/housing- from 2016 to 2019: Evidence from the Survey of costs.pdf. Accessed February 17, 2022. Consumer Finances.” Page 11, Table 2. https:// 13. Office of Governor Gavin Newsom. January 15, www.federalreserve.gov/publications/files/scf20. 2019. “Governor Newsom Unveils Proposals to pdf. Accessed February 17, 2022. Tackle Housing Affordability Crisis.” https://www. 20. Debbie Arakel, Executive Director, Habitat for gov.ca.gov/2019/01/15/housing-affordability- Humanity. August 26, 2021. Written testimony crisis/. Accessed February 17, 2022. Also, to the Commission. Page 6. Available on Governor Gavin Newsom. January 15, 2019. Commission website. Also, Joint Center for Executive Order N-06-19. https://www.gov.ca.gov/ Housing Studies of Harvard University. “The wp-content/uploads/2019/01/EO-N-06-19.pdf. State of the Nation’s Housing 2015.” Page 17. Accessed February 17, 2022. https://www.jchs.harvard.edu/sites/default/files/ 14. California Department of Finance. Enacted media/imp/jchs-sonhr-2015-full_0.pdf. Accessed California Budget 2019-20. Budget Summary: February 17, 2022. Housing and Local Government. Pages 73-74. 21. California State Auditor. November 2020. https://ebudget.ca.gov/2019-20/pdf/Enacted/ “California’s Housing Agencies.” Report 2020-108. BudgetSummary/HousingandLocalGovernment. Page 10, Figure 3. http://auditor.ca.gov/pdfs/ pdf. Accessed February 17, 2022. reports/2020-108.pdf. Accessed February 17, 15. California Department of Finance. Enacted 2022. Number of households data available at California Budget 2021-22. Budget Summary: the United States Census Bureau. “Quick Facts: Housing and Homelessness. Pages 93-96. California.” Population Estimates, July 1, 2021 https://ebudget.ca.gov/2021-22/pdf/Enacted/ (V2021). https://www.census.gov/quickfacts/CA. BudgetSummary/HousingandHomelessness.pdf. Accessed February 17, 2022. Accessed February 17, 2022. CALIFORNIA HOUSING: BUILDING A MORE AFFORDABLE FUTURE | 23 22. California State Auditor. November 2020. 29. Paavo Monkkonen and Spike Friedman, “California’s Housing Agencies.” Report 2020-108. University of California, Los Angeles. February Page 10, Figure 3. http://auditor.ca.gov/pdfs/ 2019. “Not Nearly Enough: California Lacks reports/2020-108.pdf. Accessed February 17, Capacity to Meet Lofty Housing Goals.” Page 3. 2022. https://www.lewis.ucla.edu/research/california- lacks-capacity-to-meet-lofty-housing-goals/. 23. Legislative Analyst’s Office. March 17, 2015. Accessed February 17, 2022. “California’s High Housing Costs: Causes and Consequences.” Page 27. https://lao.ca.gov/ 30. Claudia Cappio, Former Local Planning Official reports/2015/finance/housing-costs/housing- and Former Director, California Housing Finance costs.pdf. Accessed February 17, 2022. Agency and Former Director, Housing and Community Development (2011-2015). Written 24. Debbie Arakel, Executive Director, Habitat for testimony to the Commission. Pages 1-2. Humanity. August 26, 2021. Written testimony Available on Commission website. to the Commission. Page 7. Available on Commission website. 31. Governor Gavin Newsom. March 22, 2019. “Proclamation of a State of Emergency.” 25. Claudia Cappio, Former Local Planning Official https://www.gov.ca.gov/wp-content/ and Former Director, California Housing Finance uploads/2019/03/3.22.19-Wildfire-State-of- Agency and Former Director, Housing and Emergency.pdf. Accessed February 17, 2022. Community Development (2011-2015). Written testimony to the Commission. Page 2. Available 32. There is controversy around whether those 35 on Commission website. projects met the Governor’s stated goals of acres to be treated, though it is clear they did not. This 26. Debbie Arakel, Executive Director, Habitat for is why the Commission recommends a realistic Humanity. August 26, 2021. Written testimony number of projects in a realistic timeframe. It to the Commission. Page 11 Available on should be noted that those projects did meet Commission website. their intended goal of protecting communities from wildfire. Capital Public Radio provides an 27. Examples include: California Global Warming excellent summary of the controversy here: Solutions Act of 2006 (AB 32), Chapter 488, https://www.capradio.org/articles/2021/06/23/ Statutes of 2006. https://leginfo.legislature. newsom-misled-the-public-about-wildfire- ca.gov/faces/billTextClient.xhtml?bill_ prevention-efforts-ahead-of-worst-fire-season- id=200520060AB32. Accessed February 17, 2022. on-record/. Sustainable Communities Strategies (SB 375), Chapter 728, Statutes of 2008. https://leginfo. 33. Terner Center for Housing Innovation, University legislature.ca.gov/faces/billTextClient.xhtml?bill_ of California, Berkeley. March 20, 2020. The Cost id=200720080SB375. Accessed February 17, of Building Housing Series. https://ternercenter. 2022. berkeley.edu/research-and-policy/the-cost-of- building-housing-series/. Accessed February 17, 28. Denise Pinkston, Founder and President, The 2022. Casita Coalition, and Partner, TMG Partners. August 26, 2021. Written testimony to the 34. Denise Pinkston, Founder and President, The Commission. Pages 5-6. Available on Commission Casita Coalition, and Partner, TMG Partners. website. 24 | LITTLE HOOVER COMMISSION August 26, 2021. Written testimony to the legislature.ca.gov/faces/billNavClient.xhtml?bill_ Commission. Page 13. Available on Commission id=202120220AB1199. Accessed February 17, website. 2022. 35. Terner Center for Housing Innovation, University 42. Ben Metcalf, Managing Director, Terner Center of California, Berkeley. March 2018. “It All Adds for Housing Innovation, University of California, Up: The Cost of Housing Development Fees Berkeley. September 23, 2021. Written testimony in Seven California Cities.” Page 11. https:// to the Commission. Page 3. ternercenter.berkeley.edu/wp-content/uploads/ 43. Ben Metcalf, Managing Director, Terner Center pdfs/Development_Fees_Report_Final_2.pdf. for Housing Innovation, University of California, Accessed February 17, 2022. Berkeley. September 23, 2021. Written testimony 36. Terner Center for Housing Innovation, University to the Commission. Pages 2-3. of California, Berkeley. March 2018. “It All Adds 44. Ben Metcalf, Managing Director, Terner Center Up: The Cost of Housing Development Fees for Housing Innovation, University of California, in Seven California Cities.” Page 3. https:// Berkeley. September 23, 2021. Written testimony ternercenter.berkeley.edu/wp-content/uploads/ to the Commission. Pages 2-3. pdfs/Development_Fees_Report_Final_2.pdf. Accessed February 17, 2022. 45. Ben Metcalf, Managing Director, Terner Center for Housing Innovation, University of California, 37. Peter Whoriskey, Spencer Woodman, and Margot Berkeley. September 23, 2021. Written testimony Gibbs. December 15, 2021. “This Block Used to Be to the Commission. Pages 2-3. for First-Time Homebuyers. Then Global Investors Bought In.” Washington Post. https://www. 46. Ben Metcalf, Managing Director, Terner Center washingtonpost.com/business/interactive/2021/ for Housing Innovation, University of California, investors-rental-foreclosure/. Accessed February Berkeley. September 23, 2021. Written testimony 17, 2022. to the Commission. Page 1. 38. Stan Oklobdzija. February 24, 2021. “Institutional 47. AB 1350 (Friedman). 2017. https://leginfo. Investors in California Housing Markets.” https:// legislature.ca.gov/faces/billTextClient.xhtml?bill_ cayimby.org/institutional-investors-in-california- id=201720180AB1350. Accessed February 17, housing-markets/. Accessed February 17, 2022. 2022. 39. AB 354 (Calderon). 2017-18. https://leginfo. 48. Ben Metcalf, Managing Director, Terner Center legislature.ca.gov/faces/billTextClient.xhtml?bill_ for Housing Innovation, University of California, id=201720180AB354. Accessed February 17, Berkeley. September 23, 2021. Written testimony 2022. to the Commission. Page 3. 40. Governor Edmund G. Brown Jr. September 27, 49. Erin Baldassari and Molly Solomon. October 2018. Veto Message. https://www.ca.gov/archive/ 5, 2020. “The Racist History of Single-Family gov39/wp-content/uploads/2018/09/AB-354-Veto. Home Zoning.” KQED. https://www.kqed.org/ pdf. Accessed February 17, 2022. news/11840548/the-racist-history-of-single- family-home-zoning. Accessed February 17, 2022. 41. AB 1199 (Gipson). 2021. https://leginfo. CALIFORNIA HOUSING: BUILDING A MORE AFFORDABLE FUTURE | 25 50. Andre Perry, Jonathan Rothwell, and David Harshbarger. November 2018. “The Devaluation of Assets in Black Neighborhoods.” The Brookings Institute. https://www.brookings.edu/wp-content/ uploads/2018/11/2018.11_Brookings-Metro_ Devaluation-Assets-Black-Neighborhoods_final. pdf. Accessed August 10, 2021. 51. Manuela Tobias. May 17, 2021. “What California Lawmakers Could Do To Boost Homeownership For Black Families.” CalMatters. https://www. capradio.org/articles/2021/05/17/what-california- lawmakers-could-do-to-boost-homeownership- for-black-families/. Accessed August 10, 2021. 52. U.S. Department of Housing and Urban Development's (HUD's) Office of Policy Development and Research. Fall 2012. https:// www.huduser.gov/portal/periodicals/em/fall12/ highlight3.html. Accessed February 17, 2022. 53. Terner Center for Housing Innovation, University of California, Berkeley. March 2018. “It All Adds Up: The Cost of Housing Development Fees in Seven California Cities.” Page 3. https:// ternercenter.berkeley.edu/wp-content/uploads/ pdfs/Development_Fees_Report_Final_2.pdf. Accessed February 17, 2022. 26 | LITTLE HOOVER COMMISSION Little Hoover Commission Members CHAIRMAN PEDRO NAVA | Santa Barbara ASM. PHILLIP CHEN | Yorba Linda Appointed to the Commission by Speaker of the Assembly Appointed to the Commission by Speaker of the Assembly John Pérez in April 2013 and reappointed by Speaker Anthony Rendon in October 2021. Elected in November of the Assembly Anthony Rendon in 2017 and again 2016 to represent 55th District. Represents portions of Los in 2021. Government relations advisor. Former State Angeles, Orange and San Bernardino counties and the Assemblymember from 2004 to 2010, civil litigator, cities of Brea, Chino Hills, Diamond Bar, La Habra, Industry, deputy district attorney and member of the state Coastal Placentia, Rowland Heights, Walnut, West Covina and Yorba Commission. Elected chair of the Commission in March Linda. 2014. BILL EMMERSON | Redlands VICE CHAIRMAN SEAN VARNER | Riverside Appointed to the Commission by Governor Edmund G. Appointed to the Commission by Governor Edmund G. Brown Jr. in December 2018. Former senior vice president Brown Jr. in April 2016 and reappointed in January 2018. of state relations and advocacy at the California Hospital Managing partner at Varner & Brandt LLP where he Association, State Senator from 2010 to 2013, State practices as a transactional attorney focusing on mergers Assemblymember from 2004 to 2010, and orthodonist. and acquisitions, finance, real estate, and general counsel work. Elected vice chair of the Commission in March 2017. GIL GARCETTI | LOS ANGELES Appointed to the Commission by Governor Gavin Newsom DION ARONER | Berkeley in November 2021. Professional photographer and author Appointed to the Commission by the Senate Rules of ten books. Former Los Angeles County District Attorney, Committee in April 2019. Partner for Aroner, Jewel, and teaching Fellow at Harvard University’s Kennedy School, Ellis. Former State Assemblymember from 1996 to 2002, and president of the California Science Center Foundation’s chief of staff for Assemblymember Tom Bates, social Board of Trustees. worker for Alameda County, and the first female president of Service Employees International Union 535. SEN. DAVE MIN | Irvine Appointed to the Commission by the Senate Rules DAVID BEIER | San Francisco Committee in September 2021. Elected in November 2020 Appointed to the Commission by Governor Edmund G. to represent the 37th Senate District. Represents Anaheim Brown Jr. in June 2014 and reappointed in January 2018. Hills, Costa Mesa, Huntington Beach, Irvine, Laguna Beach, Managing director of Bay City Capital. Former senior officer Laguna Woods, Lake Forest, Newport Beach, Orange, of Genentech and Amgen, and counsel to the U.S. House of Tustin, and Villa Park. Representatives Committee on the Judiciary. SEN. JIM NIELSEN | Gerber ASM. TASHA BOERNER HORVATH | Encinitas Appointed to the Commission by the Senate Rules Appointed to the Commission by Speaker of the Assembly Committee in March 2019. Elected in January 2013 to Anthony Rendon in October 2021. Elected in November represent the 4th Senate District. Represents Chico, Oroville, 2018 to represent the 76th Assembly District. Represents Paradise, Red Bluff, Yuba City, and surrounding areas. Camp Pendleton, Oceanside, Vista, Carlsbad, and Encinitas. JANNA SIDLEY | Los Angeles CYNTHIA BUIZA | Los Angeles Appointed to the Commission by Governor Edmund Appointed to the Commission by Speaker of the Assembly G. Brown Jr. in April 2016 and reappointed in February Anthony Rendon in October 2018. Executive director of the 2020. General counsel at the Port of Los Angeles since California Immigrant Policy Center. Former policy director 2013. Former deputy city attorney at the Los Angeles City for the American Civil Liberties Union, San Diego, and Attorney’s Office from 2003 to 2013. policy and advocacy director at the Coalition for Humane Immigrant Rights of Los Angeles. Full biographies are available on the Commission’s website at www.lhc.ca.gov. ANTHONY CANNELLA | Ceres Appointed to the Commission by the Senate Rules Committee in March 2022. Civil engineer and principal with Northstar Engineering Group. Former State Senator from 2010 to 2018. Previously served on the Ceres City Council and was twice elected mayor of that city. CALIFORNIA HOUSING: BUILDING A MORE AFFORDABLE FUTURE | 27 “DEMOCRACY ITSELF IS A PROCESS OF CHANGE, AND SATISFACTION AND COMPLACENCY ARE ENEMIES OF GOOD GOVERNMENT.” By Governor Edmund G. “Pat” Brown, addressing the inaugural meeting of the Little Hoover Commission, April 24,1962, Sacramento, California Milton Marks Commission on California State Government Organization and Economy www.lhc.ca.gov