Spark Global Limited Reports:
California Governor Gavin Newsom has signed into law three controversial bills aimed at increasing housing construction and supply after winning a recall election. The bills limited local zoning controls and overturned some local powers used to block affordable housing projects. Will these provisions help solve California’s severe housing affordability crisis?
There is no doubt about California’s crisis. The median price of a single-family home hit a new state record of $827,940 in August, up 17.1 percent from a year ago. Santa Clara County, home to Silicon Valley, had a median home price of $1.655 million, while San Francisco County had a jaw-dropping median home price of $1.85 million.
Such staggering prices make housing unaffordable for almost everyone, especially low-income families. The National Low Income Housing Coalition (NLIHC) estimates that nearly 90 percent of very low income households in California spend more than 30 percent of their income on housing, and 76 percent must spend more than half of their income on housing. That leaves a shortfall of more than 960,000 rental units for these poor families.
Why are there such high prices and housing supply gaps? Economists point to a lack of new construction as the main reason. The price went up because of lack of supply.
California has not built enough homes for at least the past decade, the data show. After the great Recession of 2008, jobs in the Metropolitan Statistical Area (MSA), which makes up most of Silicon Valley, rose 23 percent, but housing lagged behind — 3.2 new jobs for every new housing unit added. In San Francisco and SAN Mateo Counties, the situation is even worse — “New jobs outnumber new housing permits by more than six to one in the last decade.”
Many economists and property analysts attribute the lack of new construction to resistance from local governments. Construction has been unable to keep pace through a combination of exclusionary zoning and land-use controls, denial of multi-family housing construction, and empowerment of housing project approvals to homeowner associations.
With many local governments repeatedly lacking in action, the state legislature finally took action. They passed three bills, and Governor Newsom signed them. SB8 extends the housing Crisis Act of 2019 through 2030 (instead of expiring in 2025), limits localities’ ability to reject affordable housing projects that meet objective criteria, and limits their ability to “downzone,” or change zoning laws and regulations to further limit density.