Why did the California Senate shunt a cost-cutting housing bill?

Last month, RAND, a prominent think tank based in Santa Monica, published an exhaustive study on housing costs that devastatingly proves how California has been undermining its official goal of increasing production.

After examining more than 100 multifamily projects in three states, RAND concluded that building them in California is 2.8 times as expensive as in Texas and 1.5 times higher than in Colorado, “with much of the difference driven by state and local policies that contribute to long permitting and construction timelines, and higher local development fees.”

Even more shockingly, RAND found that projects for low-income families cost 1.5 times as much to build as market-rate housing in California and four times the average cost in Texas.

Last week, the California Senate appeared to double down on making housing development more difficult and costly, shunting a bill aimed at making it easier to build housing for lower-income families by exempting some projects from the California Environmental Quality Act.

Senate Bill 607, carried by state Sen. Scott Wiener, a San Francisco Democrat, was gutted in the Senate Appropriations Committee, apparently because Senate leaders such as President Pro Tem Mike McGuire caved into fierce opposition from environmental groups and labor unions, which celebrated the move. The committee announced that SB 607’s contents were being stripped out and replaced by vague language declaring intentions to negotiate further, leaving the fate of the proposal unclear.

Those who either oppose housing projects on environmental grounds or demand concessions, such as requiring them to use union construction labor, have often used — or misused — CEQA as a tool. Over the last half-decade, the Legislature and Gov. Gavin Newsom have nibbled at CEQA’s provisions, but when SB 607 was introduced, environmental and labor groups drew an opposition line in the sand.

After the bill was bowdlerized last week, the coalition praised McGuire and other Senate leaders “for recognizing that the language of SB 607 would have created significant unintended consequences on communities and new legal uncertainties.”

Just days earlier, Newsom had urged the Legislature to pass SB 607 and a similar measure, Assembly Bill 609, as much-needed reforms to increase housing development.

“It’s time to get serious about this issue, period, full stop,” Newsom said. “If you care about your kids you care about getting this done. This is the biggest opportunity to do something big and bold and the only impediment is us.”

The SB 607 blockage may indicate that Newsom is losing clout with the Legislature as he nears lame duck status. However, he could revive the bill as part of the forthcoming negotiations over the state budget, as a statement by Wiener and McGuire suggested.

 The RAND study reveals why the state is falling behind.

“California is significantly more expensive than both Colorado and Texas in every cost category that we examined,” Jason Ward, lead author of the report, said in a statement. “One way to address California’s high housing costs is to look for lessons from states where it is easier and less expensive to build new housing.”

The report urges California to emulate a Texas law giving local governments just 30 days to approve or reject projects to reduce California’s 22-month average processing time, to reduce mandatory fees, and to consider modifying California’s strict energy efficiency requirements.

The most poignant finding in the report, however, is that “if California had Colorado’s production costs for publicly subsidized affordable apartments the roughly $1.25 billion in recent spending by the state’s four largest funding programs would have produced more than four times as many units.”

That’s what California is giving up as it continues to make housing development more costly than it needs to be.