Little Hoover Commission's Affordable Housing Report Details The Crisis & Local Government Reacts

Executive Summary

Among the most basic of human needs is a place to call home. And nowhere in the United States is this need harder to satisfy than in California. The lack of affordable housing is so severe that it threatens the health and welfare of thousands of Californians, as well as the state's long-term prosperity.

As California's population has grown, housing production for most income levels has failed to keep pace. Escalating housing prices have put home ownership in many communities out of reach for middle income workers like teachers, firefighters and law enforcement officers.

But the impact of the State's housing shortage is felt most profoundly by low-income Californians who struggle to keep a roof over their heads. Among low-income renters, about two-thirds pay more than half of their income for housing and 91 percent pay more than the recommended 30 percent. Homelessness also is increasing, affecting approximately 361,000 Californians – more than 1 percent of the population.

For those with the lowest incomes, an adequate supply of affordable housing can mean the difference between having a safe place to sleep and being homeless, between paying the rent or having adequate food, clothing and health care. For many, the housing crisis is putting beyond reach the "American Dream" in its most humble terms of safe, stable and secure housing.

The Department of Housing and Community Development asserts that if current trends continue, California will build less than 60 percent of the new housing needed over the next 20 years.

A central tension in housing policy is created by California's strong tradition of local control and the statewide interest in an adequate supply of housing. Cities and counties adamantly defend their authority to make land use decisions. But the aggregate of those decisions increasingly fails to meet regional and statewide needs, particularly when it comes to housing.

Regional economies have evolved from cities and counties that in an earlier time functioned largely independent of one another. In the 21st century, economic viability and issues like transportation, air quality and housing transcend the boundaries of local governments.

Even where new housing is a priority, communities and regions must negotiate legitimate and inherent conflicts over social equity, environmental protections, inadequate infrastructure and fiscal responsibility. Californians have come to associate growth-particularly multifamily housing-with noise, traffic congestion, school overcrowding and other negative impacts on the quality of life. Affordable housing also competes with the desire for more open space, tax-rich retail development and other priorities.

Still, communities have more opportunities than they recognize or acknowledge. Communities can pursue partnerships to lower risks for developers, streamline review procedures and build community support for affordable housing. Without undermining Prop. 13, residents could approve a small surcharge for water and sewer fees to create a subsidy for low income housing.

Local control also means local responsibility. Laguna Beach, for example, has virtually no developable land left and some of the state's highest real estate values, yet finds ways to make land available for affordable housing. "There are obstacles," said the city's director of community development, "But where there's a will, there's a way."

The Commission also concluded that the State needs to seize every existing opportunity to encourage and help local governments make affordable housing happen. Every regulation, every requirement and every funding stream encourages local governments to act in certain ways. The challenge is to align those incentives with the development of affordable housing. Transportation funds, park bonds, housing bonds and all other funding streams with a nexus to urban development can be used as incentives. Communities that are meeting their performance goals should go to the front of the line. Communities that are unwilling to do their part should have a longer wait for limited funds. They also could lose discretion in how they spend existing funds, including redevelopment funds.

The State also should create new opportunities by helping communities to effectively and safely recycle brownfields for residential development. It can develop model zoning ordinances that encourage efficient and transit-oriented development and employ other strategies that will help local communities develop housing in ways that are economically, socially and environmentally responsible.

To overcome the barriers to the development of housing, the State needs a comprehensive public policy that does not dictate local land use decisions, but compels communities-with incentives, assistance, and sometimes penalties-to do their part in meeting the statewide need for housing.

The Commission has identified five important ways that state policies should be reformed to increase the supply of affordable housing:

1) The State should provide leadership and strengthen housing element law to make more land available for housing. It should refocus the law from planning for housing to ensuring that housing is built.

2) Public policies should be reformed to encourage greater use of urban "brownfields" for affordable housing, while enhancing the well-being, ensuring the health and safety, and encouraging the involvement of neighborhoods and residents.

3) The State should draw more investors into the market by accurately identifying and reducing the risks associated with affordable housing and identifying new sources of private capital.

4) Public subsidies-essential to providing low-income housing in an inflated market-should be consistent, reliable and efficiently allocated. Some infrastructure-related costs for affordable housing should be reduced, shifted to the State or shared by the larger community.

5) State housing programs should be coordinated to make access to subsidies easier, streamline monitoring requirements and provide technical assistance.

The State has struggled to define a relationship with local jurisdictions that respects "local control" over land use decisions, while ensuring that housing is available for a growing population. The State has nudged, cajoled, and encouraged local jurisdictions to do their part. Many have responded, but many have resisted. The housing element law alone provides little incentive to comply and no consequence for failure to perform.

The Commission believes that the statewide interest and the needs of communities can be met with leadership and reforms that provide meaningful incentives for affordable housing, reduce barriers and provide technical assistance to implement effective strategies.

Affordable Housing Findings/Recommendations

I. Finding: California does not have adequate state policies to ensure that local communities provide housing at all income levels, particularly for those at the lowest income levels.

Recommendation: To make sure its housing goals are met, the State should implement a comprehensive set of planning policies and fiscal incentives to ensure that local jurisdictions effectively plan for and actually produce affordable housing.

II. Finding: Urban brownfields are an undeveloped opportunity to make land available for affordable housing close to job centers, break the cycle of deterioration and enhance the well-being of surrounding neighborhoods.

Recommendation: California should seize the opportunity that urban brownfields present for increasing the supply of affordable housing by establishing policies and incentives that prioritize the reuse of these sites.

III. Finding: Diminished investment incentives, coupled with uncertainty and perceived risk, have quashed private investment in affordable housing-particularly multifamily housing.

Recommendation: The State should implement policies and promote practices to increase private investment in affordable housing.

IV. Finding: Public subsidies for affordable housing are inconsistent, unreliable and are not allocated in ways that provide the greatest value.

Recommendation: The State should identify permanent, dedicated sources of funding for the California Housing Trust Fund, promote local housing trust funds and enact policies to share infrastructure-related costs for affordable housing.

V. Finding: Developers of affordable housing must patch together funding from multiple and disparate sources, delaying development and increasing costs.

Recommendation:The State should enact policies and practices designed to facilitate easy access to affordable housing resources.