Terner Center Blog: No Limits

From Small Steps to Giant Leaps: What Must Come Next for the California Housing Agenda?

On Friday, September 15th, the California Legislature approved a package of 17 bills aimed at putting a dent in the state’s housing crisis. While the votes came down to the wire, in the end, the need for solutions won the day, and in the coming weeks the Governor is expected to sign each piece of legislation, officially ushering in the most significant housing policy changes in recent memory. You can read our recap of these bills in an earlier blog post here.

Drafting, amending, defending and eventually passing these bills was no small feat, and the legislature, the Governor and his administration, and the many groups who participated in the legislative process are to be congratulated. The housing package includes several significant changes, including funding streams to subsidize housing for the state’s most vulnerable, accountability measures to ensure all localities are producing their fair share of housing for all income levels, and measures to streamline development approvals that will accelerate the delivery of homes.

Yet, as Senator Scott Weiner (D- San Francisco), the author of the SB 35 project streamlining bill, has described it, this housing package represents merely a “down payment” on solving the state’s chronic housing shortage. We believe that this is an apt description. While the slew of new legislation makes important improvements, much more must be done to truly reverse the decades of inaction and exclusion that led to our current crisis.

Given the severity of California’s housing deficit, now is not the time to rest on our laurels. The legislature has created momentum which must be built upon and expanded to ensure that significant structural housing reform becomes a reality. As hard fought as these recent victories were, truly bold decisions are needed in the near future to adequately address what has become a seemingly intractable problem.

To move in the right direction, we need legislation that will actually substantially lower the cost of production. While SB 2 and SB 3 add much needed revenue to subsidize housing production, a considerable gap remains in the total funding needed to build enough homes to meet demand. This gap will widen as the cost of development continues to rise. While some of the streamlining bills in this recently passed package may reduce holding and predevelopment costs for select projects, none of the new pieces of legislation directly address the astronomical and growing cost of new construction, and some are likely to add new costs, largely cancelling out any savings achieved from streamlining.

This unresolved cost issue coupled with disincentives for cities to approve their fair share of housing means that leaders across the state need to think bigger. To do so, we first need to understand what is driving these growing costs, and understand what proportion are levied unnecessarily on the backs of new projects through exorbitant fees and exactions, well-meaning yet costly wage requirements, and ever costlier planning and building code restrictions and processes that can string projects along indefinitely. Armed with this knowledge, cities will also need stronger financial tools to produce a range of housing and the infrastructure needs that come with it. To that end, Terner Center is undertaking an array of new research, from understanding the drivers of construction cost increases in California to examining the variability and consistency of local impact fees. This work will help to inform the next generation of policy solutions.

In California, our economy is powered by the very people who struggle to find housing and keep up with excessive rents and prices: from teachers, first responders, and tech workers, to artists, small business owners, charitable organization employees, and healthcare workers. Recent research from UC Berkeley’s Enrico Moretti shows that our inability to house these populations costs the US economy $1.6 trillion a year in productivity. Ultimately, this is not simply a housing crisis: it encompasses significant threats to our environment, social fabric, and economy. We need a next generation of policies that foster a better functioning housing market that can serve the families that comprise the backbone of our economy, while protecting public resources for our most vulnerable populations facing displacement and inadequate housing options. We must also be focused on climate change realities and help bring down greenhouse gas emissions through housing production that reduces the miles Californians travel by car. We need homeownership opportunities for young families just starting out and micro rental units for others. And the opportunity to live affordably should be available everywhere, from dense downtowns to mid-rises in infill areas and even in our single family neighborhoods—which are by far the largest geographic areas in most California cities.

The decisions ahead will require the courage to pursue effective reform with politically difficult solutions. The legislature and Governor will need to summon their strongest political will to meaningfully challenge our entrenched and inequitable housing system with “both/and” solutions that truly support smart growth with controlled costs. The recent housing wins must serve as a catalyst for impactful next steps, and it is our optimistic hope that this momentum is sustained until real, tangible results emerge for housing California’s families in affordable, sustainable and vibrant communities.

California Steps Forward for Housing

Posted on by David Garcia and Carol Galante

On Friday, September 15th, the California legislative session ended with the passage of 17 individual pieces of legislation aimed at alleviating the state’s ongoing housing crisis. While three particular bills have received the most attention—SB2, SB3, and SB35—several other bills headed for the Governor’s desk are also likely to have an important impact on the landscape of the state’s housing policy. We have compiled a brief overview of each bill that passed, organized into policy categories. While the passage of these newly approved policies is certainly a milestone, we also know there is much more work ahead. Stay tuned for…

Legislation for Information: Sacramento’s Role in Filling Housing Data Gaps

Posted on by Carolina Reid and Echo Bergquist

As California’s lawmakers return to Sacramento next week, it is worth paying attention to current legislative efforts to improve access to data that can inform our understanding of the state’s housing crisis. While the final package of housing legislation is still to be determined, some of the original bills -- including SB 35, AB 1397, and AB 879—have the potential to improve housing data quality throughout California.   Why focus on data?  Despite the severity of California’s housing crisis, and the importance of the housing sector to the overall health of the state’s economy, we lack basic data on many…

Modular Construction in the Bay Area: The Future is Now

This post originally appeared on the ULI San Francisco Blog on August 2, 2017. After years of abstract discussions and false starts, modular building may finally be gaining the momentum it needs to make an impact in the Bay Area. Why now? And why here? On Tuesday, July 18, the San Francisco District Council of the Urban Land Institute hosted “Modular Construction in the Bay Area: The Future is Now”, an event moderated by Terner Center for Housing Innovation Faculty Director Carol Galante. The panel discussion featured four leaders committed to bringing this innovative housing method to scale in the Bay Area: Developers Rick Holliday of Holliday…

Too Big to Hide: The Importance of Public Data on the Mortgage Market

Posted on by Carolina Reid and Echo Bergquist

Fair lending is the foundation of a thriving economy, both locally and nationally. Access to credit drives home purchases, revitalizes neighborhoods, and allows families to build wealth for future generations. Since the financial crisis, however, tighter credit standards have made it increasingly difficult to obtain a mortgage, especially for low-income and minority borrowers.  A key challenge facing policymakers is how to reform the housing finance system in a way that provides access to credit for a broad range of households, yet at the same time ensures that homeownership is sustainable over the long-term.  Striking this balance is critical, not only…

Jumpstarting the Market for Accessory Dwelling Units

This post originally appeared on the Berkeley Blog on May 23, 2017. It shares insights from our recently released report Jumpstaring the Market for Accessory Dwelling Units: Lessons Learned from Portland, Seattle and Vancouver.   ADU permitting explodes: Permits as a share of all residential permits. How did Portland, Oregon go from permitting two accessory dwelling units (ADUs) per month in 2009 to almost two per day in 2016?  Now, more than one of every ten housing units built in Portland is an ADU. Compared to other housing types, ADUs, or separate small dwellings embedded within single family properties, are…

Highlights from the Terner Center Promoting Affordability Conference

Though U.S. cities like Boston, New York, San Francisco and Los Angeles are important engines of the American economy, their rapid growth in jobs and populations has not been met with a comparable pace of growth in housing. The result? Increasing pressure on both the rental and for-sale housing markets, and skyrocketing costs of living for a larger and larger proportion of the people who live in these cities.  On Thursday June 1, the Terner Center hosted a special convening intended to delve into this issue, exploring solutions to that could help expand the supply of housing, lower the cost…

Rowing in the Same Direction? Aligning Sustainability and Housing Policies, Strategies and Goals

Posted on by Sara Draper Zivetz

Access to quality housing in stable neighborhoods is increasingly recognized as a fundamental building block for individual and family outcomes. Where you live, how much you spend on your housing, and how stable a place it is for you and your family has well-documented effects on economic prosperity, educational attainment, and health and well being, among others. Meanwhile, the location, design and affordability of housing is also deeply tied to issues of environmental justice and climate change. As related but distinct segments of the environmental field, housing and housing policy play an important though often under-discussed role in both issues:…

Balancing the tax code to relieve housing cost burdens

Posted on by Terner Center Team

Of the more than 21 millions renters in the United States who are burdened by the cost of housing today, more than 15 million can not access assistance they are eligible for, because there aren’t enough federal resources to meet their needs. In part, this is a result of skewed tax code that directs significant expenditures to homeowners and other policy priorities, and leaves the housing security and economic mobility of renter families behind.  Amidst emerging conversations about reforming the federal tax code, it is important that we are reminded of this imbalance and seize the opportunity, should there be…

Building Affordability by Building Affordably: the case for Off-site Multifamily Construction

Posted on by Carol Galante and Sara Draper-Zivetz

To remain relevant and successful over time, every industry must modernize and adapt to changing demands and opportunities in the marketplace. The housing development industry is no exception, and over the years, has experienced its fair share of evolutions and revolutions in business model and product design. Today, as housing developers face rapidly changing consumer preferences, population demands, technological advances, and an ever- rising cost of construction, the adage “innovate or perish” may be timelier than ever. How will the housing industry adapt to these new realities? As a recently released report from McKinsey & Company points out, the construction…