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Creating a "Home" for Good Housing Policy

By Paul Lewis, research fellow, Public Policy Institute of California
This opinion article appeared in Western City Magazine in the August 2002 issue

Some view housing development in California as a threat to the quality of life; others as a numbers game that the state is losing, with disastrous results for housing affordability. From either perspective, the policy challenge is daunting: How do we improve housing opportunities for Californians - and better connect new residential development to areas of job growth - without slighting environmental protection, community character, or local budgetary needs?

Two useful precepts to consider are to balance local responsibilities with local rewards, and providing more information and certainty to those involved in and affected by the development process.

Matching Responsibilities with Rewards
Communities are more enthusiastic about new housing when it is accompanied by tangible benefits or amenities. Recent state legislation providing one-time funds for localities that increase housing development is a promising, if somewhat ad-hoc start. More fundamental reform would devote a larger slice of the property-tax pie to general-purpose local governments (though the state's budget crisis has stalled such an approach). The property tax has long been the main means by which residential development contributes to local treasuries in America.

Balancing jobs and housing geographically may require new policy approaches. The coastal metropolitan areas have become enviable job centers, but are, in effect, exporting much of their new housing development to inland communities, whose residents face commutes that can strain their ties to family and community. One policy option would be levying an impact fee at the regionallevel on new commercial development in job-heavy areas -- and to a lesser degree on new housing in job-poor areas. To overcome the "nexus problem" that requires local revenues to be collected for local ends, the state would need to grant authority to some regional entity - perhaps a successor to today's councils of governments - to levy the fee and administer the fund.

The resulting revenue would be targeted at remedying the regional strains of growth; portions might go to regional transportation improvements, affordable housing subsidies and acquisition of regional parks and open space. The formula could differ across regions according to their specific needs and could be devised by a regional compact. The state could reward regions entering into a compact by providing matching funds or permitting them to lower their voter approval threshold to 55 percent for infrastructure bonds. Conceivably, the regional entity could be given the task of certifying local housing elements, with the Department of Housing and Community Development (HCD) responsible only for reviewing the housing goals and actions of the regional entity itself.

Statewide, there may be a need to find some ongoing revenue streams for infrastructure improvements, especially for transportation and school construction. (The recent passage of Proposition 42 is one step in this direction, although it diverts existing general purpose funds rather than creating a new funding source.) Though unpopular, gasoline tax increases have been the main mechanism to fund transportation improvements throughout the world. California's gas tax rate has not increased for a decade. Today, "self-help" county sales taxes are given a huge burden for transportation improvements, and voter approval requirements mean that some are likely to sunset in coming years. Traffic snarls, along with overcrowded schools, inflame the local growth controversies that are often a precursor to restrictive housing policies and voter ballot box land use planning.

Increasing Information and Certainty
California's development process is unpredictable. Thus, builders are understandably wary of some types of projects, and residents are frightened of how their communities might change. These concerns point to the need for more information for all parties involved.

One step might be to require the formal disclosure to homebuyers of future development plans in their neighborhood. For example, asking new homeowners to acknowledge that the old farm down the road is zoned for medium-density housing could limit unwelcome "surprises" and undermine subsequent opposition to growth.

Another informational tactic involves gaining a better sense of the physical potential for new housing. Developers report that the price of land is so high in many metropolitan locations that asking rents for new multifamily housing would have to exceed what the market will currently bear-even though many Californians already pay stratospheric rents. This indicates that the supply of residential land may be too low in these areas. Regional planning agencies could investigate this issue by engaging in continuing, state-of-the-art land supply tracking. We need to know how much buildable land exists to support housing (and other uses) and whether it is appropriately zoned and serviced.

The state could also make greater efforts to actively support moderate- to high-density infill housing. HCD could highlight examples of well-designed infill housing and host an "academy" on the infill process for local officials and developers. Although some view density increases in older communities as beyond the pale, the urban and suburban places that we think of as attractive and livable - Newport Beach, Old Town Pasadena, Capitola, San Mateo - tend to be among California's more densely settled localities. Perhaps a statewide informational campaign is in order - a strike force to anticipate and counter NIMBYism (not in my back yard).

Two other important targets for increased information and certainty involve the California Environmental Quality Act and the issue of construction defect liability that hampers condominium production. There has been no shortage of promising reform proposals in Sacramento on both fronts, including efforts to streamline environmental review requirements or to move to a system of warranties and arbitration to resolve construction defect claims. Both areas may be ripe for compromise legislation that could make housing development a less risky process.

State Support, Local Action
Organizationally, the state could move toward greater policy integration and more partnership with local governments by creating a Department of Community Affairs, pulling together the current responsibilities of HCD and the Office of Planning and Research. The new department would also coordinate with the environmental agencies to reach out to communities on issues like air and water quality planning.

Cities and counties, though, have always been the level at which American government rolls up its sleeves and gets to work. It is probably illusory to expect higher levels of government to solve our housing problems. But the state-by balancing rewards and responsibilities for local governments, improving the information flow and increasing certainty in the development process-could at least provide a more supportive environment for housing quality and quantity in California's communities.


Just the Facts: Cities and Growth in California

California's Housing Element Law: The Issue of Local Noncompliance

Cities Under Pressure: Local Growth Controls and Residential Development Policy

Metropolitan Growth Planning in California, 1900-2000

Statewide Survey - May 2001 - Growth

Statewide Survey - November 2001 - Land Use

Statewide Survey - November 2002 - Land Use