California Housing Crisis: Part 1

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Editor’s Note: This is Part 1 of a three-part article. Part 2 will appear in the June Apartment Journal.

Early in 2018, California lawmakers tried but failed to repeal the State’s Costa Hawkins Rental Housing Act—the law that restricts the ability of local governments to establish extreme forms of rent control. Had the repeal effort been successful, local governments would have had the authority to restrict rents on single-family homes, condominiums, and all newly constructed housing units. Repeal would also have brought back vacancy control—the prohibition on rent increases when a housing unit becomes vacant.

While repeal would have provided protections for tenants against rent increases in the short term, the long-term effects would have devastated the State’s housing supply as extreme forms of rent control make owning and developing units unprofitable and unmanageable. Moreover, rent control often leads to severe gentrification in which higher income earners eventually push low-income individuals and families out of their rent controlled units.

The long-term negative impact of extreme forms of rent control on tenants and on property owners and managers was precisely the reason the Costa Hawkins Act was originally signed into law in 1995.

It was a bipartisan effort to allow for moderate rent control provisions while curbing out-of-control regulation on the rental housing industry. The resulting bill did just that: it reigned in some of the most extreme forms of rent control by outlawing vacancy control and price ceilings on single-family homes and new construction, while preserving local government’s ability to place rent control restrictions on properties built before 1995.

The decision to repeal the Costa Hawkins Act comes at a time when the State is in dire need of affordable rental housing. According to the State’s nonpartisan Legislative Analyst’s Office (LAO), California’s ongoing housing shortage and affordability problems are getting worse. The problems stem from years of population growth and a long history of costly government regulatory roadblocks to housing development, local government favoritism toward commercial development and job growth over housing development (“fiscalization of land use development”), high permit and impact fees, and rising land and housing development costs. As is clear from the LAO report, many of the State’s housing problems are directly attributable to government action and inaction.

The irony here is that government leaders are attempting to address government created housing shortage problems by adopting legislation that will serve to further restrict the State’s housing supply.

The government’s repeal effort, as counter productive as it may be, however, is consistent with a long history of government decisions that have contributed to, rather than solve, the ongoing housing crisis. This paper focuses on those very government decisions which have contributed to the housing shortage and have kept California in a perpetual state of housing crisis for the last 50 years.

I. The Wisdom of the Legislative Analyst’s Office’s 2015 Housing Report.

California is building too few homes in coastal areas, the now infamous 2015 LAO housing report says.1 Land costs are too high, but can be offset by more density, the report continues.2 Building costs, development costs, and permitting fees are also through the roof according to the report (and not in those words).3 To the question of why coastal areas are not building enough, the housing report provides four answers: a) NIMBY (“not in my back-yard”), b) stringent environmental reviews, c) local finance structures which incentivize nonresidential development over homes (also called fiscalization of land use), and d) limited vacant land.4

Notably, while the LAO report notes that rent control eases housing costs for some,5 it also does not recommend rent control or other housing regulations as viable options to address the State’s crisis. It does state, however, incentivizing development of private housing is the number one priority to begin easing housing shortage and affordability problems.6

II. Government and Its NIMBY Policies.

“Not-In-My-Back-Yard,” the policy or principle of being anti-development in one’s own neighborhood or city, has long been recognized as one of the catalysts for California’s housing shortage. As summarized by the LAO:

For decades, California’s local communities—particularly coastal communities-have built too little housing to accommodate all those who wish to live here.

California’s cities and counties make most decisions about when, where, and to what extent housing will be built. Many local communities have used this authority in ways that have constrained housing development. These community decisions understandably reflect residents’ concerns about the changes that new housing may bring. New housing—and the associated new residents—can exacerbate traffic congestion and parking shortages, stretch local facilities, slow home price appreciation, and alter the community’s character.7

Interestingly, but not surprisingly, NIMBY-ism has racist roots. In San Francisco, for example, as affordable housing needs increased, it began building segregated housing projects by race.

San Francisco did not want its Chinese American residents to live anywhere except in Chinatown. To ensure their confinement in their picturesque ghetto, the Housing Authority imposed a whites only rule for the first three projects it built, all of which still stand: Holly Courts, Potrero Terrace and Sunnydale.


* * *

The official policy [of the San Francisco Housing Authority] was to accept only tenants who conformed to a “neighborhood pattern”—the racial and ethnic demographics of a given neighborhood. Since the city was largely white, minorities were allowed to live in public housing only in a few rundown areas.8

Housing was not welcome in San Francisco. Many neighbors and city leaders opposed the development of public housing projects, fearing the projects would be populated by an undesirable class of people, depress property values, give a false portrayal of the city or an area as a slum, and endanger children.9

As San Francisco’s population continued to rise, NIMBY-ism morphed, at least on the surface, from discriminatory sentiment to one justified by preserving the city’s physical character and environmentalism. Privately, many were concerned with preserving property values.

Over the years, these anti-development sentiments were translated into restrictive zoning, the most cumbersome planning and building approval process in the country, and all kinds of laws and rules that make it uniquely difficult, time-consuming, and expensive to add housing in San Francisco.

This anti-development sentiment has kept San Francisco from meeting its housing needs. When San Francisco should have been building 5,000 new units a year to keep up with demand, it has only averaged 1,500 units a year for the past two decades.10 All across the city, instead of building up and more densely it has created roadblocks and restrictions. One of the biggest roadblocks is the city’s height limits, which limits buildings to no more than 40 feet.11 On average, San Francisco is three stories high.12 Compare that to Paris, which aver ages seven stories, and many Asian cities, which are much taller.13 By density, San Francisco does not even figure on the 50 densest cities in the world.14

NIMBY-ism perpetrated by local governments is one of the root causes of the State’s housing shortage. Governments’ prioritization of city character over meeting housing has led to the adoption of many anti-development laws which in turn has slowed development. Only recently has the State Legislature acknowledged the problem. To combat government sponsored NIMBY-ism, it passed several bills in 2017 to address the issue. One of the bills forces cities to approve projects that comply with existing zoning if not enough housing has been built to keep pace with housing tar gets, while another bill penalizes governments for rejecting housing projects that comply with zoning requirements.

Editor’s Note: This is the end of Part 1 of 3. Part 2 will appear in the June issue of the Apartment Journal.

Ron Kingston can be contacted at This e-mail address is being protected from spambots. You need JavaScript enabled to view it No portion of this article may be reproduced or copied without the permission of the author (Copyright © 2018 CALPCG).



1 Mac Taylor. California’s High Housing Costs: Causes and Consequences. CA Legislative Analyst’s Office. An LAO Report.
March 2015. Web Jan. 2018.
2 Id. at 12-13.
3 Id. at 13-14.
4 Id. at 15.
5 Id. at 7-9.
6 Id. at 34-35.
7 Mac Taylor. The 2016-17 Budget: Considering Changes to Streamline Local Housing Approvals. Ca. Legislative Analyst’s Office. May 2016. See Summary at 1. Web January 2018.
8 Gary Kamiya. “How SF’s Housing Authority kept its early projects all white.” San Francisco Chronicle. July 22, 2016. Web January 2018.
9 Id.
10 Gabriel Metcalf, Sarah Karlinsky and Jennifer Warburg. “How to Make San Francisco Affordable Again.” SPUR. The Urbanist. Issue 530. February 2014. Web January 2018.
11 Madeline Stone. “This Is What San Francisco Could Look Like If It Had Enough Housing For Its Growing Population.” Business Insider. May 22, 2014. Web January 2018.
12 Christian Nicholson. “Nostalgia and NIMBYism: Rebecca Solnit’s San Francisco — The Bold Italic — San Francisco.”
The Bold Italic. February 18, 2014. Web January 2018.
13 Id.
14 Id.

 

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