Why it’s not easy to build affordable housing in California

While running for governor three years ago, Gavin Newsom foolishly promised that if elected California would solve its housing crisis by building 3.5 million units by 2025.

Newsom later downgraded the pledge by calling it an “aspirational goal.” Nevertheless, he continued to flog the issue, devoting virtually all of his 2020 State of the State to the housing shortage and homelessness and pledging anew to attack them forthrightly and effectively.

Punctuating that approach, the state Department of Housing and Community Development, armed with new regulatory authority, ramped up its pressure on local governments to zone enough land to meet its much-higher housing quotas.

Newsom’s dramatic emphasis on housing in 2020 was almost immediately set aside when the COVID-19 pandemic erupted, but his latest and much-revised state budget returns to the issue, declaring — accurately — that the “pandemic further exacerbated the statewide housing shortage and impacted housing affordability.”

The budget proposes to spend $9.3 billion in state and federal funds on “additional and expanded rental assistance, foreclosure prevention, and down payment assistance investments.”

“Moreover,” the budget continues, “to continue the momentum on housing production, the administration also proposes innovative ways to further plan, produce, preserve, and enhance the state’s supply of long-term affordable housing.”

It sounds like a timely assault, but there’s flip-side: the state itself is a major impediment to acting effectively and pending legislation could make construction of affordable housing even more difficult and expensive.

Last November, state Auditor Elaine Howle issued a blistering report on the state’s uncoordinated housing programs.

“California is failing to build enough affordable homes for lower income residents in part because the state lacks an effective approach to planning and financing development of affordable housing at both the state and local levels,” Howle told legislators.

“In fact,” Howle continued, “the absence of a comprehensive and coordinated plan allowed the Debt Limit Committee to mismanage and ultimately to lose $2.7 billion in bond resources with little scrutiny, a loss that the committee failed to publicly disclose and struggled to explain. These bond resources could have helped support the construction of more affordable housing.”

When the Legislature reconvened in January, a group of legislators, led by Assemblyman Tim Grayson, a Concord Democrat, introduced legislation that would bring some order to the state’s jumble of housing agencies. It would require them to “jointly establish and operate a single, centralized housing funding allocation committee,” thereby giving developers of low- and moderate-income housing a one-stop shop and speeding up construction.

Assembly Bill 1135, however, was held in the Assembly Appropriations Committee last week. There was no public explanation for the stall, but it was obvious to those involved that it was because Grayson had rebuffed demands from construction unions that all projects affected by its provisions be required to use union labor.

The unions are making a full-court press this year to have all housing-related legislation contain that requirement, and in fact, two other bills cleared the committee only after having such language inserted.

One, Assembly Bill 512, would allow the City of Pasadena to sell surplus land at below-market prices for affordable housing. The other, Assembly Bill 950, gives similar authority to the state Department of Transportation.

So while Newsom is promising an aggressive effort to ease the state’s housing crisis and reduce homelessness, his housing agencies are a bureaucratic mess and legislation to clean it up has stalled because unions are demanding a monopoly on jobs that probably would increase the already high construction costs, thereby limiting supply.

Is California a wonderful place or what?