October 23, 2019 - From the October, 2019 issue

Related’s Bill Witte Unpacks California's 'Housing Affordability Crisis' 

Bill Witte, CEO and Chairman of Related California—one of the largest developers of urban and multifamily housing in the state—has for the past 30 years been responsible for the strategic direction of the company, overall management of the firm, pursuit of new development opportunities, and oversight of planning, financing and construction of a development portfolio of 16,000 residential units totaling more than $6 billion in assets. TPR recently interviewed Bill on how state and local governments ought to respond to the state’s challenges with housing affordability, growth in homelessness, and 'missing middle' housing supply.


Bill Witte

"I’m very supportive of the effort to reinstate redevelopment, because the tools of redevelopment are one of the few ways that cities, particularly growth areas, can leverage resources in a targeted way to affect housing affordability."—Bill Witte

Bill Witte—as the Chairman and CEO of Related California and someone who’s been involved very successfully in building affordable housing for more than three decades-—how should political and civic leaders be framing the challenges of increasing the supply of affordable housing , and also homeless units, in California’s urban metropolises?

Bill Witte:I’ve long stated that government can affect the availability and affordability of housing really in just two ways. The first, which until recently has been given short shrift, is land use policy, and the second is direct financial support. 

The good news is that with the ascension of Governor Newsom and activity in the state legislature, there have been more initiatives proposed and more discussion about increasing housing for all income levels than I’ve seen in California in my professional career—which goes back to 1981. The uncertain news is that some of the underlying challenges that would enable many of these initiatives to really bear fruit in a timely way haven’t really been addressed yet. 

First of all, job growth fuels housing demand. There has been a lot of job growth at the high end and the low end, but not so much in the middle. And yet, a lot of the response to the housing problem has been to impose fees on market-rate housing. Housing doesn’t create housing demand; job growth creates housing demand. Housing accommodates housing demand. I do find that to be an ineffective response to the housing supply and even affordability issue.

The second—for which I have no immediate solution and the state doesn’t seem to agree on one either—is that in California, every little jurisdiction seemingly has—except for unincorporated parts of counties—its own planning commission. Land-use policy is so disaggregated that, even though housing markets are at a minimum metropolitan wide, there seems to be little opportunity for real regional planning.

Third is—at least of late—while Governor Brown was a great governor, housing was not his thing; it didn’t get a lot of attention in Sacramento while he was governor. 

What has happened? These are all obvious things. The affordability gap particularly in Coastal California—between an increasing percentage of the population and the reality of market-rate rents and home prices—keeps widening, despite whatever efforts seem to be made at the local level. 

Data shows that the middle class—at least in raw numbers—is leaving California, on a net basis. And yet, population is growing to some degree at the high, college-educated end, and at the low end. Jobs tend to be either demanding of a lot of technical background, or in the service industry. That’s not a recipe for a healthy environment. So, what to do? 

I think that’s a whole different question about what the response to this can be. There have been various initiatives—mostly by Bay-area legislators, and in particular San Francisco State Senator Scott Wiener—to have the state intervene in local markets to free up density. It’s been, in my opinion, widely misunderstood in places like Los Angeles where resistance has been fierce—but I don’t think the City of Los Angeles is the culprit here. In many suburban communities, the resistance is indefensible. Either you accept that we have a housing problem, or you don’t. You can’t just point fingers and say it’s not my responsibility. 

The most egregious example of that is in Marin County, north of San Francisco. Politically, it’s one of the more liberal counties in the state, but it is more fiercely resistant to housing of any kind, particularly any density, as much as or more than any place I’ve seen. That’s just not right, but the state is so large—and I’ve told this to people in Sacramento—that trying to impose a statewide solution to this seems to be doomed to political failure. Although the fact that people are still proposing it and raising the issue is a good thing. 

Is it fair to assume that silos are more easily broken at the local level, not at the state level in terms of having a holistic policy solution?

City halls are usually in the best position not only to respond to it, but to be held accountable for how they respond. Having said that, I think the state has a very relevant roll to play using its bully pulpit to prod and incent people at the local level to act. I happen to believe that in many places–not San Francisco, maybe not LA–if the state weren’t pushing so hard on housing, there would be less focus on it. 

Maybe regional approaches are better. Where does that take us in LA? Housing markets and housing dynamics are in fact regional, but every little burg has its own planning commission and, to some degree, land use control. You have SCAG, but it has no teeth and, frankly, I don’t think it has a lot of credibility. Particularly after a few years back when it concluded that the Inland Empire, not Orange County, should carry the load of affordable housing. But where are the service jobs that those low-income people are working? They’re in Orange County. 

Could there be some multi-mayor initiative? I don’t know. There are some positive signs. The City of LA passed its $1.1 billion housing bond for capital costs; the county, led by Mark Ridley-Thomas, passed that $350 million bond for operating costs. I think that was a rare and very positive example of the city and the county working together on a semi-regional problem. I do think—as the LA Times never stops reminding us—maybe the city was a little slow in getting organized to implement it.  But it’s a very complicated issue, and it’s not easy

We’ve built 30,000 units in downtown Los Angeles—and you’ve been a major contributor to that productivity—rents have only gone up and the working class has lost leverage. What are the lessons here about how we frame this issue?

There are a couple of things. There’s been huge job growth since the recession. Number one, as much progress has been made particularly in Downtown LA and a few other places, it’s obviously not enough. Number two, it’s not just a supply-side problem, but that is part of it. People are here for those jobs, and they’re already here. When people oppose transit-oriented development or say it’s a sham, my question is where are these people going to live? 

Let me be more specific. Just because we need supply, doesn’t mean that you should have a 40-story high rise in a single-family neighborhood. I think LA has done a reasonable—not perfect— job in trying to steer high-density development to neighborhoods where it makes sense in terms of transit accessibility and, more importantly, in terms of urban design and planning. Except how do you respond to the reality that, for whatever reason, a lot of the job growth has been on the Westside of LA, but most of the housing has been in or around Downtown. And that’s not to say it isn’t needed there, but there is a disconnect. 

I will say something—and I’ve said this before publicly—about all this housing in downtown, where there’s all this talk about housing affordability. Here’s the one part of the city where a whole range of incentives—zoning and other land use maneuvers—have been used to generate lots of housing and quite successfully. How much of that has been set aside as affordable? I think the percentage is miniscule, and I’m not focusing on any one project or proposal. If that’s where the bulk of your housing is being produced, and you can’t find a way—holistically, not project by project—to generate more affordability, I think something is wrong with the policy.

You acknowledged that housing and homelessness are complicated issues. Unpack a little bit the issue such that our readers, legislators, or city managers can appreciate their complexities. 

We have begun working with the Weingart Center who already has one development in the works—a very large, new homeless housing development in Skid Row. We’re also doing work with A Community of Friends in Santa Ana on a homeless and affordable housing project. I’ve asked them and others how much of the homeless population is mentally ill and drug addicted? How much is pure, economic homelessness? 

I don’t think there’s hard data on this, but that’s one layer of complexity. There is a view that you have to address the social and healthcare side of this before you address the housing side, or you’ll never be able to dig out from under it. That’s a little bit different from the ‘housing first’ view of getting people into stable shelter first. Regardless, I’m not taking sides; I’m just saying it makes it a challenging issue. There are people making $50,000 to $60,000 a year who can’t afford housing; we’ve got to get them in affordable housing. They’re good citizens; it’s purely an affordability issue. 

The second complexity comes from understanding the dynamics. The city of LA’s population is around 13 percent African American, and I believe the homeless population is maybe 40 percent African American. What does that say about the local dynamic? There’s a similar dynamic in San Francisco. For example, are there a lot of people homeless because they got pinged with a marijuana citation when they were younger, so then they couldn’t get a job. Then they fell into this, and into that, and then into homelessness. I’m not an expert, but I think it’s really important to understand these things when you want to try to address them, maybe to prevent further homelessness. 

The third thing is not everybody who opposes having a homeless project in their neighborhood is a NIMBY. It’s fair to say—particularly if it’s a ‘housing first’ project and you have kids in school nearby—that it’s not irrational to be a little worried that maybe there’s someone who’s out of control in the housing down the street. These are things, just alone, that make this issue really complicated.

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The LA Times has done great work on this. They recently ran a couple of storiesabout the homeless development in South Central, and shared the story of some women who got into the development, and after several months were finally asked to leave because anti-social behavior continued. These are really difficult issues. I do think there are groups in the city—Weingart, Community of Friends, Skid Row Housing Trust—who are really immersed in this, doing good work, and need to be consulted. 

Turning to the approval by the legislature of a community redevelopment-like program—SB 5—offered by Senator Jim Beall that was vetoed by Governor Newsom. Talk about the role of CRAs and this effort by the legislature to reinstate it in some form.  

I’m very supportive of the effort to reinstate redevelopment, because the tools of redevelopment are one of the few ways that cities, particularly growth areas, can leverage resources in a targeted way to affect housing affordability. What they’re going to have to grapple with is one of the things that undid redevelopment in California. It was—and I don’t want to say abused, because that implies malice—but it was too easy to claim blight  for redevelopment funds. When the cities of Mission Viejo and Indian Wells have redevelopment agencies, something is wrong. I have the perspective of someone who started his career in Philadelphia. I like to say I know blight when I see blight, and that ain’t it. 

They’re going to have to find a way—if they’re going to be successful—to (1) target it much more, which means there’s going to be some Assembly and state Senate districts that don’t have it, and (2) work out some compromise with the education establishment so it’s not viewed as a raid on money that would otherwise go to education. 

Share with our readers the competition for capital that often spills over into policy debates in the legislature. By example, you just noted that some of the opposition to the governor signing if SB 5 is from education interest groups who worried that the latter Bill will divert money to housing from education. Elaborate on how politics and money affect state housing policy.

You have the governor—former mayor of San Francisco—who is known for making bold policy moves. Now he’s trying to do it at a state level where you have far more divergent interests. I think the jury is out—not just on housing versus education, but even within those constituencies—on how it’s going to play out. Remember a few years ago, Governor Brown and the legislature, some would say, diverted money that had been approved on the ballot for mental health into pure homelessness. There is obviously overlap with mental health, but there’s always going to be some tension even though all of these issues go together. Housing has been the loudest voice in the room over the past year or two, but under Governor Brown it was education by a mile, for a while. 

I think what I will be looking to see is how concerns about efficiency and effectiveness play out. All this money is flowing now, but can it be implemented well? It’s the same debate and discussion you saw recently with homeless dollars. I think the voters who supported this funding are going to want to see outcomes and improvement. If they’re not improving, why not? 

You note that—especially in the Capitol—there are many interest groups and money typically follows their siloed interests- whether they be housing, education, healthcare, the environment, criminal justice, etc. It’s the local level where efforts to holistically pool state programs into place-based strategies/solutions happen, not in the State Capitol. Yet Senator Wiener’s SB 50 would wrest zoning and planning authority from local decision makers to the state. Is that the place where the holistic solutions you prefer really ought to be shaped?

Ultimately, no. What I think the state can do—and I think it’s having some effect now—is be the bully pulpit to push, prod, and ultimately incent local governments to move in a certain direction. California’s too big and diverse a state to have a one-size-fits-all policy. Having said that, I think all the noise around housing now is having an impact. There’s a lot more dialogue at the local level on housing than there used to be. 

One of the objections I’ve heard from people in LA about state involvement in housing is that LA is doing a lot to address the problem and already building a lot of housing. There’s some truth to that, but by prodding people to focus on this issue with the veiled threat of state intervention to penalize places like the City of Huntington Beach and 82 other cities that aren’t building, I think it’s having an impact. We’ll have to see. 

What incentives ought the state provide?

There’s a range of them. The state now—because of state-passed bond measures, and some of the governor’s initiatives—has a lot more money available for affordable housing. This is a sensitive one, because there are many particular suburban communities probably happy not to have any. I think they can certainly use the performance date as one criterion for awarding, or rewarding, local governments with housing resources. 

Another thing, which has also come up and is sensitive, is infrastructure. A lot of homeowners groups—who aren’t inherently opposed to new housing, but weary of it—agree that we need housing but argue the need for infrastructure to support it. Or, they just want or need it for transit or other things. Some of those resources come, or can come, from the state, as a ‘carrot,’ not just a ‘stick’. There are perhaps other areas where funding is not absolute where the ‘carrots’ can be used to push people in a rational way to focus on more increasing the supply of housing. 

If there were a new state constitutional amendment that would incent greater housing production at the local level with state financial support for locally targeted infrastructure to carry the load of new density. Would you favor it?

I like the notion of what you might describe as ‘matching grants’, because there are incentives on both sides. I like the idea, but I’d have to think about how you would craft that in legislation. I think something like that is worth considering. To your point—if in fact we ultimately agree that implementation is best crafted and done at the local level, that means not passing off that responsibility to the state and encouraging it through resource allocation. Otherwise, you’re simply punishing the city and saying, ‘do it, or else’. 

TPR interviewed US Rep. Earl Blumenauer on his report documenting the role the federal government has traditionally played in housing and asking that it reassume that role. Fannie Mae and Freddie Mac privatization are also being debated. Please help put both in the context of this California housing interview.

Frankly, my view of the federal role in housing—almost regardless of which party is in power—is, at the moment, do no harm. I’m not holding out great hope that the federal government—regardless of who the president is—is going to shower money on cities or states for housing. Second thing is, the feds are almost uniquely ill-suited to predetermine the best housing strategies at the state or local level. This administration obviously is not going to do it, and I would first focus on anything the feds are doing that is—inadvertently or otherwise—making the situation or problem worse. 

Now, Fannie and Freddie is a significant issue, and it’s been going on for years. Most of the focus traditionally has been about its role in the single-family mortgage market. But, in our world, Fannie and Freddie play a very significant role in the financing and refinancing of multi-family housing. Depending on what they propose, it should be a real shot across the bow, which harms the multi-family and even affordable housing markets. This is an area that calls for rational, non-partisan thinking. Whether they are reaching out and trying to get that is not clear to me.

Lastly, share with our readers Related California’s developmental history and record of accomplishments?

Related Companies in New York founded by Steven Ross in 1972, started as a developer of assisted housing and grew in the 1980s and 1990s into one of the largest privately held real estate companies in the United States. Related has offices—in California in Irvine, LA, and San Francisco—in Boston, Chicago, Miami, and of course the main office in New York where they act as our financial partner. 

Interestingly, even as Related is now known for Grand Ave., Hudson Yards, and Time Warner Center, it is by far the largest owner of affordable housing in the United States, with over 55,000 units—13,000 of which are in California. We also just opened a Related Northwest office last year in Portland, Oregon for affordable housing, and we have four projects there now.

In California, we have an affordable housing division and a mixed-income and market rate housing division, both of which I oversee.

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© 2019 The Planning Report | David Abel, Publisher, ABL, Inc.