California’s widening housing gap defies state efforts to jump-start construction

Every recent legislative session has produced at least one effort to ameliorate California’s chronic shortage of housing – and sometimes several.

They generally make it easier for developers to navigate through the often obtuse permitting process and thus more difficult for local opponents of housing projects to block construction.

This year’s session was typical, its most prominent product being Senate Bill 423, which extends an earlier permit streamlining effort for affordable housing known as Senate Bill 35 and – of particular note – makes it applicable to the state’s coastal zone. The latter provision is important because it reduces opportunities for NIMBYs to use the California Coastal Commission’s land use powers to block developments.

Earlier streamlining measures had exempted the coastal zone but the pro-housing movement prevailed, arguing that affluent elites living along the coast should share their space with those who need shelter.

“With the strengthened SB 35’s streamlining provisions, we’re bringing California’s ambitious housing goals within reach,” said state Sen. Scott Wiener, a San Francisco Democrat who carried both bills. “SB 35 has proven one of the strongest tools in our toolbox for driving affordable housing development.”

Wiener says that since 2017, SB 35 has helped develop more than 18,000 units of affordable housing, which sounds impressive. Every bit helps, but 18,000 units over five years is merely a fraction of new housing construction the state housing agency says is needed every year.

To enforce its housing goals, the state has assigned quotas to each region, later translated into goals for each city, for land to be designated for housing. It also prohibits arbitrary conditions on proposed developments and sues cities that don’t meet its standards. In recent years, the statewide goal was 180,000 units a year, but with recent population declines the state has lowered the goal to 148,000.

Nevertheless, California is still falling well short with the 2023-24 budget’s estimate of 109,000 units being built in 2023. The budget directly and indirectly allocates nearly $15 billion to housing production, but the state needs at least $90 billion a year in private and public investment to meet its 148,000-unit goal – assuming there is land and other resources adequate to support that level of construction.

California’s housing shortfall is dramatically illustrated by a new state-by-state report.

RubyHome Luxury Real Estate, a residential real estate broker, used the Census Bureau’s American Community Survey to determine how much of each state’s housing stock has been constructed since 2010, thus revealing differences in development vigor.

Texas came out on top, with 22.5% of its 11.1 million units of housing having been built between 2010 and 2022, followed by other states with fast-growing populations, including No. 7 Nevada. Rhode Island was dead last at 4.9% and most of the others in the bottom tier were eastern or midwestern states with little or no population growth, including No. 47 New York.

And California? It’s also one of the laggards at No. 41, with just 1.1 million or 8.1% of its 13.6 million units of housing having been built since 2010.

“Decades of housing underproduction have contributed to a supply and demand imbalance, resulting in limited housing options available for renters and homeowners, and contributing to millions of households paying a disproportionate share of their income toward housing,” the state budget declares. “These issues contribute to growing numbers of people who are either experiencing or are at risk of homelessness.”

That’s a succinct summary of the state’s housing dilemma. Legislation such as SB 423 and the state’s multibillion-dollar commitment are positive steps but the “supply and demand imbalance” has so far defied official efforts to jump-start construction and continues to widen.