February 1, 2001 - From the February, 2001 issue

Assembly's Housing Chair Hopes to Marry Smart Growth & Density

Developers blame restrictive regulations. Environmentalists blame profit hungry developers. And the average homeowner merely sees density as a new buzz-word for "urban renewal." California Assemblyman Alan Lowenthal has heard these discussions from his position as Chair of the Assembly's Housing and Community Development Committee and has shaped his Committee's vision to deal with them holistically. TPR was pleased to speak with the Assemblyman, who offered his thoughts on how to increase housing production, curb the current dearth of affordability and educate the populace on the true virtues of density.


Alan Lowenthal

Alan, as the Chair of the California Assembly's Housing and Community Development Committee, please begin by giving our readers a brief overview of your Committee's accomplishments in the previous legislative session?

Our biggest accomplishment last session was the approval of a $500 million appropriation from the General Fund that addressed the most important aspects of the current housing crisis: supply, affordability and rehabilitation. In that budget we allocated $188 million for the development of multi-family rental housing, $25 million to create the Downtown Rebound program, $100 million for down-payment assistance and homeownership programs, $110 million for the Jobs-Housing Balance Improvement Program, $10 million for improved code enforcement and $39 million for an emergency housing program.

How do you intend to build on last session's legislative success?

The progress we made in the last legislative session really sets the vision for this year's legislative direction whose task is to encourage programs that incentivize "smarter" housing development on both the supply and demand sides.

On the demand side, our current plan is to thoroughly explore the merits of location efficient mortgages, which encourage people to buy homes near mass transit and/or employment nodes. The basic premise is that because of a homeowner's proximity to these high-traffic nodes they are less reliant on the automobile and will have additional resources for monthly mortgage payments. Greater mortgage payments translate into more opportunities for leveraging increased downpayment assistance.

On the supply side, our goal is to increase the number of housing developments planned in conjunction with Smart Growth principles. If a developer is going to build an infill project near a job center or along transit lines they will have access to some of the $100 million proposed for infrastructure, brownfield cleanup or rehabilitation and preparation of the site.

We're also continuing to work on crafting an effective tax credit program. We will be examining some innovative approaches which would encourage California corporations to make donations towards housing and community development projects for low-income persons. But in order to do that we need to create a mechanism that would allow businesses to take a credit on income, franchise or insurance premium tax. We hope that this kind of program will promote an increased number of coalitions and partnerships between nonprofits, government and the private sector.

This year also marks the initiation of a working group on redevelopment. A redevelopment agency is required to invest no less than 20-percent of its tax increment revenue on low- and moderate-income housing projects-but is that really happening? This working group will answer that question and really examine how this money is being spent. We hope to find out whether the current situation is truly helping the statewide crisis or acting as a hindrance.

The last thing I'll mention is the Committee's increased oversight function. Last month we began to ask the Department of Housing and Community Development to report on how funding appropriations were being administered. We want to see who's applying for program dollars, how soon the funding is being delivered, and how many units that funding actually translates into. But most importantly, we realize that a single paradigm does not fit every situation or municipality and we want to make sure our programs are impacting all levels of the crisis.

With that overview Alan, let's turn to specifics-construction defects. The California Supreme Court recently ruled that developers are not responsible for construction defects when no actual building damage has occurred. Could you comment on how that's effected the housing supply-demand challenges for California and the legislative agenda before your Assembly Committee.

This is a very complicated issue. We're trying to balance the historically adversarial relationship of consumer protection with the current need for increased housing development.

Whether we change the Calderon process or increase home warranties, we will hopefully be able to protect consumers and decrease the amount of time spent in litigation. It's going to be a high priority and regardless of whether my Committee is involved or not, I'll be participating in the process. I know that this is a high priority for the Assembly Judiciary Committee and it's Chair Darrell Steinberg.

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Let's move then to the question of whether California's current State/local fiscal relationship encourages or discourages housing production. In The Planning Report's July 2000 issue, Nick Bollman Chair of the Speaker Hertzberg's Commission on Regionalism and President of the California Center for Regional Leadership said, "California's system of local government finance limits the amount of revenue generated by housing and encouraged local communities to favor sales tax generating retail over residential of other forms of commerical development." With a new legislative session now well underway, is there a glimmer of hope that the State/local fiscal issue will be successfully tackled?

I understand the severity of the problem, and it's definitely something that needs reexamining. I had hoped that this problem would've been resolved last year with Senator Burton's ERAF transfer cap, but the Governor's veto proved otherwise. However, the State-local fiscal relationship is such an important issue, it'll be back on this year's agenda.

The growing consensus is that housing will be the next major crisis in the state. And with the increasing number of state legislators with local government experience, everyone realizes that the key to addressing housing lies in fiscal reform and incentives for government. Without a dedicated revenue stream that allows local government the flexibility to complete long-range planning we will never solve this problem. If localities continue to rely solely on sales tax and have no dedicated property tax stream, they can only do stop-gap, short-term planning and that only offers quick fixes.

Having said all of that, there's no doubt that the magnitude and scope of the electric crisis puts everything else in abeyance. We frankly don't know what resources will be available for anything until we can solve this electricity problem.

A lot of commentators and electeds have said the problem re: housing is really the unwillingness of local officials to grapple with increased density knowing that their constituents are likely to oppose to it. Is there a way to give "cover" to local elected officials willing to rethink land use patterns in our urban areas? Is there anything on your committee's agenda that could give some support for good planning?

There has always been an adversarial relationship between state and local governments. And issues like housing are hard for local agencies to confront when they have to duck for cover because their constituents don't want density, their municipality doesn't have enough resources or they view the crisis as another unfunded mandate from the state.

To tackle those issue we first need to develop better partnerships, funding mechanisms and educational campaigns to assist in the clean up and rehabilitation of local cities. Density is seen as a terrible issue because people believe that it brings deterioration. People are frightened of it because they see density as poorly constructed buildings and deteriorated neighborhoods rather than a mechanism for increasing vibrancy, reducing reliance on transportation, more effectively using existing infrastructure and protecting the environment. We have to educate, create incentives and give them cover by encouraging a dialogue that sheds a positive light in density. This type of strategy will provide an enormous carrot for housing development, but at the same time we have to start enforcing the Housing Element-a comprehensive approach must include both the "carrot" and the "stick."

The outreach process for housing needs to clearly define a set of goals and values at the grassroots level where we can build consensus and teach people that density doesn't destroy neighborhoods, its makes them better, stronger and adds a greater sense of community. If we can't convince people that our current model doesn't work and that we're headed for more sprawl and greater freeways, the future and the possibility of homeownership and increased quality of life is in serious jeopardy.

Alan, that's a great segue into asking you whether that's the kind of stump-speech you'd make either for Mayor of Long Beach or the next Congressman from that area?

Well, right now I'm enjoying my job as Chair of the Assembly Housing Committee.

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