On Jan. 1, a package of housing legislation that was passed in 2023 took effect. Will the results be a homebuilding boom? California’s housing gap is implausibly wide, so it’s going to require a historic effort to catch up.
In 2015, the Legislative Analyst’s Office said that “on top of the 100,000 to 140,000 housing units typically built in the state each year, the state probably would have to build as many as 100,000 additional units annually” in order “to seriously mitigate housing affordability problems.” These homes need to be located “almost exclusively” in California’s coastal communities, where the need for affordable housing is the greatest and the barriers to build have at times been insurmountable.
A couple of years later, Gov. Gavin Newsom, then running for his first term as California’s chief executive, promised to “lead the effort to develop the 3.5 million new housing units we need by 2025 because our solutions must be as bold as the problem is big.”
During his reelection campaign, he downgraded his commitment, pledging 2.5 million units by 2030. In between, during his first inaugural speech, Newsom swore “we will launch a Marshall Plan for affordable housing.”
He solved the housing jam in much the same way he solved the homelessness crisis, which is to say no real progress has been made.
Of course Newsom is not the first to fail at either of those tasks. He was merely carrying on a tradition.
But maybe change has arrived. With 123,350 units built (nearly 21,000 were accessory dwelling units, or “granny flats,” which were made easier to construct by 2017 legislation), 2022 was the busiest homebuilding year since 2008. In that year, 100,000 units were built – roughly the same number completed in 1981, before California’s population had reached 25 million.
Another way to measure improvement is the cost of housing. California’s median home price was $822,200 in November. It wasn’t a record high, and was even a small decrease from October. But it was a 6.2% increase from November 2022, according to The Mortgage Reports, and is part of the steady climb that began a dozen years ago.
If the supply were more in line with demand, we would see a leveling of prices. We haven’t.
There’s optimism, however, that 2024 could be a breakthrough year.
“The era of saying no to housing is coming to an end,” Sen. Scott Wiener, the San Francisco Democrat who authored several pieces of the 56-bill package, said in a statement when Newsom signed the stack of legislation in October. “We’ve been planting seeds for years to get California to a brighter housing future, and today we’re continuing strongly down that path.”
The University of California’s Terner Center for Housing Innovation commended the Legislature for “its remarkable run over the last several years of providing developers of deed-restricted affordable housing ever more flexibility.”
“In 2024,” said Terner Center policy analysts Muhammad Alameldin and David Garcia, “we are likely to see a similar level of engagement on issues of housing and homelessness.”
No one is expecting contractors to raise a half million units this year. But the optimism is warranted.
For instance, Assembly Bill 976 makes permanent the temporary protections for building granny flats that lawmakers had previously enacted. Senate Bill 423 streamlines the approval process for multifamily housing, and also strips some of the hassles that developers encounter when trying to build multifamily housing in the coastal zone.
Other bills will clear some of the bureaucratic detritus that has dammed up affordable subdivision construction as well as remove zoning and land-use hurdles. Lawmakers even took some of the sting out of CEQA, the California Environmental Quality Act that has for decades been used to obstruct progress.
What began as an effort to prevent environmental spoilage has mushroomed from 13 separate code sections to more than 190 along with 250 implementing regulations, as well as 14 appendices. A PRI report published two years ago noted that CEQA had “slowly but steadily transformed into a Boschian hellscape that provides project opponents with countless opportunities to delay or derail important projects, often for reasons that have nothing to do with environmental concerns.”
While incremental change is welcome, the ultimate goal should be a full overhaul of the law. Given that there have been “signs of legislative frustration” with CEQA abuse, this might be more feasible than ever before. If 2023 was the year of the housing bill package, maybe 2024 will be the year of long-needed CEQA relief.
Kerry Jackson is the William Clement Fellow in California Reform at the Pacific Research Institute.
