California housing crisis unchanged by political efforts – so far

In 2017, while running for governor, Gavin Newsom pledged in a social media post that if elected “I will lead the effort to develop the 3.5 million new housing units we need by 2025 because our solutions must be as bold as the problem is big.”

“I realize building 3.5 million new housing units is an audacious goal – but it’s achievable, Newsom continued. “There is no silver bullet to solve this crisis. We need to attack the problem on multiple fronts by generating more funding for affordable housing, implementing regulatory reform and creating new financial incentives for local jurisdictions that produce housing while penalizing those that fall short.”

Newsom deserves credit for making a greater effort on housing than any other recent governor. Dozens of new laws have been passed, and the state has leaned hard on local governments to zone more land for housing and remove bureaucratic roadblocks, even suing those that drag their feet. However, the actual impact, at least so far, has been scant.

Newsom has backed away from the unrealistic 3.5 million goal, which was generated by a consulting firm using weird methodology based on construction in New York and New Jersey. He now describes it as “aspirational” rather than a promise.

Building 3.5 million units by 2025 would have required about 500,000 a year, much more than highest rate of housing construction ever achieved in California, just over 300,000 in 1986 during a period of very high population growth. In fact, since Newsom uttered the pledge six years ago, the state has added perhaps 500,000 units in total.

The Terner Center for Housing Innovation at UC Berkeley developed a summary of the dozens of laws and administrative actions to boost housing production since 2016, and told the Legislature during a recent hearing that “housing unaffordability remains high and production relatively stagnant.”

“We’re coming up short,” Ben Metcalf, managing director of the Terner Center, told legislators. “But I think it’s important to say it’s also early,” noting that many of the pro-housing policies are new and still being implemented.

So, one might ask, if the 3.5 million figure is unrealistically high, what’s the right one?

Newsom’s newly proposed budget notes that “Between January 2000 and January 2022, the state gained 5.9 million new households, but only an additional 2.5 million housing units,” which implies a backlog of 3.4 million, roughly the number he originally cited in 2017.

The state’s Department of Housing and Community Development sets regional quotas for zoning residential land on an assumption that California needs to build 2.5 million units by 2030, but that’s probably unrealistic as well. It would mean more than 350,000 a year, still higher than the 1986 construction peak.

Despite the 2.5 million figure, California’s official housing goal is just 180,000 units a year, or 1.3 million by 2030.

That level of construction would be doable under the right circumstances of having enough land zoned for residential uses, streamlining costly regulatory processes, having attractive interest rates, and overcoming shortages of construction labor and rising materials costs. Two decades ago, California was building more than 200,000 units a year, according to data from the Terner Center.

However, Newsom’s budget projects that California builders will pull permits for about 122,000 units this year, and even were that level achieved, the net gain would be lower – perhaps 100,000 due to existing units being destroyed by fire or obsolescence.

Whatever the correct “aspirational” number may be, we’re still not coming anywhere close despite spending billions of dollars and making strenuous efforts to lower hurdles. Thus the housing crisis, which includes the nation’s worst homelessness crisis, continues to worsen.