The Dam Has Broken in California Housing
Looking back on a monumental week
This month has arguably seen the peak of legislative achievements for California’s pro-housing advocacy movement. Several key Bills passed through the state legislature this Monday, which combined with bills passed earlier in this year’s session, have cumulatively added up to a potentially transformative whole:
These bills are still subject to a potential veto by Gavin Newsom, who has traditionally talked a good game on housing but has yet to firmly plant himself in the pro-housing camp. Putting aside the small but significant risk of a Newsom veto, here are some of the most impactful housing bills that passed through both chambers in the last week:
SB 886: Close readers of my blog know that one of the fundamental issues in California’s housing ecosystem is that the environmental review process, California Environmental Quality Act (CEQA), is fundamentally biased against housing and infrastructure. I wrote about CEQA earlier this year:
SB 886 would not solve all of CEQA’s issues (that would require a fundamental reworking or outright repeal of the law). However, it would exempt student housing from CEQA review, which will help universities build accommodation for the many cost-budened students. Studies have found that housing in California has gotten so bad that one in 10 CSU college students is homeless, and one in 20 UC students is homeless. This issue came to the forefront earlier this year because UC Berkeley was on the brink of denying 3000 students admission simply because neighbors in the city of Berkeley who opposed the growth of the college used CEQA to bring a lawsuit. The state passed a narrow bill to address Berkeley's issue this March, but this would be a more comprehensive solution.
AB 2234: Another huge issue in California is the prolonged permitting process. Even after projects are approved through the planning and land-use processes, they may find themselves in limbo as cities take extended periods to review whether the buildings are up to code. The slow permitting process is a big issue in cities like San Francisco and Santa Monica. Research has found that in Santa Monica, it takes an average of four years from project proposal to full approval (a significant portion of which is the building permit process). The bill would require cities to do common sense permitting practices:
Cities must provide online applications for building permits with a clear and accessible checklist that spells out needed paperwork for approval.
Cities would be required to respond to applications to develop up to 25 units in 30 days and to respond to applications to build 26 or more units in 60 days.
If this speed of response is not feasible, cities must contract third parties to review applications promptly.
AB 2234 has teeth: cities will be considered out of compliance with the state’s Housing Accountability Act (HAA) if they don’t comply. The state could then approve development on their behalf. To see the impact of this, look to Redondo Beach, where median home prices have reached 1.46 million as they lost 2.3% of their housing units between 2010 and 2020:
Source: Zillow
Source: TownCharts
Because of Redondo’s general obstinance on housing issues, they are now out of compliance with state law, which has allowed a developer to propose 2000 units of housing (including 400 subsidized units) through a provision known as the “builder’s remedy.” Redondo Beach wants to stop the project but may not be able to because they failed to comply with the law:
AB 2011: Many would argue that AB 2011 will be the most effective of all these bills. The bill rezones many of California’s commercial corridors to allow for housing alongside commercial uses. This would enable underperforming commercial spaces (mostly empty office buildings, malls, and retail stores) to be redeveloped into housing. To facilitate the fast conversion of these buildings, AB 2011 requires cities to do a streamlined, ministerial review of the housing as long as it meets affordability requirements. This will be huge in cities like San Francisco, where the city still does a discretionary review of every housing project. It also creates CEQA exemptions and allows flexibility in parking requirements.
I try hard not to overstate the impacts of housing legislation, but AB 2011 could be transformative. Some have estimated that it would increase zoning capacity by 10 million units, and of those, potentially 1.6M to 2.4M units would be financially viable, including as many as 400,000 subsidized units. Of course, not all these units will be built in the short-term, since it take years for development to happen. But increasing zoning capacity has been shown to stimulate building over 5-10 year time horizons like it did in New Zeland:
I have hope that ten years from now, we will look back and see AB 2011 as a fundamentally transformative bill!
AB 2097: This was personally the bill that gave me the most satisfaction, given all that I have written (in this blog and in work I have done on policy projects in the city) about the good that dropping parking minimums would do in Los Angeles:
For those who haven’t read that piece, here is a more concise summary I wrote for our church blog:
As you may know, this is a subject I care about, as I have written about it here and here. For those unfamiliar, what is vital to know is that parking minimums are requirements that cities put on new development and small businesses that drive up their costs. The average construction cost for a new parking space in Los Angeles is $55,000, and our county already has 19 million parking spots. If you live in an apartment building, studies show that nationwide, 17% of your rent can be attributed to the cost of parking. If you pay $1800 for a two-bedroom, that means $300 every month probably goes to paying for parking.
Now, you may like your parking spots and think that it is a worthwhile cost. In a world with mandated parking, developments (especially for middle-class Angelinos) will still include parking even when cities don't require parking. But not everyone is in the same life situation, which is why not allowing people to make this choice creates a lot of waste when placed on every development city-wide. Some estimates are that 33% of parking spots in residential complexes sit empty overnight (in addition to the vast majority of commercial parking areas, which almost all sit vacant overnight). And the waste is also a tax on the poorest Angelinos, who are least likely to own cars and most likely to take the bus but still live in buildings where they are required to pay rent for their parking spots.
Removing parking minimums in San Diego to increased by 6x new affordable units built in areas near public transit. LA would almost certainly see similar benefits, which is why many folks like the LA Times have supported the measure. In a crisis, it’s common sense to prioritize housing people over housing cars, and our state can start doing this by passing AB 2097.
Before Monday’s vote, it was not clear the bill would pass because of opposition from those who thought that only subsidized housing should drop parking minimums. I think this notion is misguided, but it's a popular idea in California’s progressive circles. However, this line of thinking did not win the day, and pro-housing people in California can celebrate that today!
Back in June, I wrote that to help LA become a more affordable city, we needed to embrace the Blue Ocean Strategy. Rather than continuing to debate, we should try to reach the vast majority of people in LA who just do not think about politics in their day-to-day life:
These are the reachable folks, and pro-housing activists should aim to convince them that a more affordable city is possible if we are wise about investing in the right policy reforms. But, to pull off this strategy, pro-housing advocates need to have a positive big-tent approach and put pragmatism above ideology.
I was reminded of this last week while attending a talk by my friend Anthony Dedousis. He pointed out that AB 2011 had done a brilliant job of building a big tent coalition:
I think Anthony hit on a fundamental insight, giving me a lot of optimism looking forward. As impactful as AB 2011 is in politics, it might be even more impactful as policy. The coalition is just as important as the bill.
What do I mean by this? Most of the most ambitious housing bills of the last four years (like SB 50 in 2019) have been opposed and torpedoed by three distinct factions:
Organized Homeowners who don’t want more density in their neighborhood, especially in single-family neighborhoods (Livable California is the statewide expression of this, but really it is most directly expressed in local neighborhood councils).
Building Trades Union, as a collection of different construction unions, wanted Sacramento to ensure they get paid as much as possible on private construction, and require a high percentage of workers are union members. Of course, these requirements will decrease the total amount of construction in the state, and thus decrease the total number of jobs.
Equity groups: who are mostly advocacy nonprofits and affordable housing developers, want to make sure new housing includes the highest rate of mandated subsidized affordable units possible, even if that means that significantly less housing is built overall.
Now, all these groups have legitimate points to raise, but they have let their narrow concerns override the clear and present need to build more housing, which is having huge negative impacts on Californians. However, within each coalition, there was a large diversity in how strongly they felt about their position. The brilliance of the work that went into AB 2011 was that the bill was able to find common sense compromises with all three groups to move the bill forward:
Homeowners have a harder time objecting to housing in commercial zones compared to 2021 when the big fight was over legalizing duplexes and fourplexes by-right. Some groups said last year that they wanted more housing in commercial corridors (not in their single-family zoned neighborhood), so it was hard for them to return on that assertion. Other homeowners associations just sat it out.
The carpenters decided to split off from the broader building trades because the bill explicitly promised higher wages and benefits for construction workers, though it stopped short of requiring the apprenticeship programs the building and trades were asking for.
The equity coalition saw affordable housing providers (most notably SCANPH in Southern California) split off from the broader equity coalition because AB 2011 gave special provisions to 100% affordable housing, which many housing nonprofits specialize in.
To be clear, many in each of these factions still opposed the bill, specifically the most hardline people in each faction (Livable California from the homeowner coalition, the broader Building Trades, and the Western Center and ACCE all opposed the bill). But their critiques were muted because policymakers saw other groups with the same concerns supporting the bill. This exposed which groups were negotiating in good faith and which groups have adopted such an extreme position that their perspective was ignored. What made AB 2011 is that it did just enough to convince the “good faith” opponents without compromising with the “bad faith” opponents.
Good policy and good politics do not have to be antithetical, and the heart of good politics is doing the hard work of convincing those who disagree with you to still go along with you. I hope pro-housing people take this to heart going forward and keep getting creative and making progress.