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Press Release · February 7, 2003

Missing the Mark? Major State Law Does Not Increase Housing Production As Intended

Many Cities and Counties Fail To Comply with Housing Rule

SAN FRANCISCO, California, February 7, 2003 – A California law designed largely to address California’s undersupply of housing is doing little to boost the number of new homes being built, according to a study released today by the Public Policy Institute of California (PPIC).

California’s “housing element” law is considered one of the state’s most important levers in influencing residential housing growth. Yet during the 1990s, cities and counties that met the law’s planning requirements did not add new housing units at a faster rate than their counterparts who fell short of the requirements. The analysis finds that between 1990 and 2000 the average noncompliant city did not have a significantly different housing growth rate than the average compliant city.

The reason? The law requires cities and counties to plan for specific numbers of new housing units, including affordable housing, but provides no direct resources to get the housing built. “The housing element law asks local governments to identify sites for housing and to adopt measures to encourage new construction, but it pretty much stops there,” says Paul Lewis, the study’s author and PPIC program director and research fellow. “Planning does not necessarily translate into housing.” Ultimately, decisions about where, when, and what kind of housing is built are made by private and nonprofit homebuilders, Lewis notes.

Compliance with the law is low, with 37 percent of cities and 27 percent of counties failing to meet the state’s planning requirements as of January 2003. Critics say this is evidence of flouting the law, but many communities argue that the regulation fails to recognize intractable local realities, such as a lack of vacant land or conflicting state laws that restrain development.

Cities that comply with the law do appear to create a heavier share of multifamily housing, such as apartments and condominiums, among their mix of new units. Overall, however, California’s Housing Element Law: The Issue of Local Noncompliance suggests that the state may need to consider a more direct approach to the housing shortage, perhaps by providing fiscal rewards to localities for greater housing production or for construction of certain types of units. Allowing builders a more direct mechanism to appeal restrictive local zoning or other regulations is another alternative Lewis discusses.

The Public Policy Institute of California is a private, non-profit organization dedicated to improving public policy in California through independent, objective, nonpartisan research on major economic, social, and political issues. The institute was established in 1994 with an endowment from William R. Hewlett.