Capitol Alert

Think rent is high in California? Here’s why it probably will get higher

If you’re a renter in California concerned about the high cost of living here, or looking to purchase your first home, your prospects aren’t looking up.

Projections show rents will continue to surge, especially for low- and middle-income people in places like San Francisco, Los Angeles and Sacramento, and home prices will become increasingly expensive, according to an economic analysis in the Anderson Forecast from the University of California, Los Angeles, released this month.

“It was already bad before, but it’s getting worse,” said David Shulman, a senior economist for the Anderson Forecast. “California is still attracting high-income people, who are creating an enormous amount of wealth, but low and middle-income people like teachers are leaving because housing has become extraordinarily expensive.”

Six out of the seven least affordable metropolitan areas across the U.S. are in California. They are Los Angeles, San Francisco, San Jose, San Diego, Riverside and Sacramento.

“It’s getting harder and harder to live here,” Shulman said. “The state is running out of people who can afford the $3,500 per-month rents so those prices are beginning to fall...but if you look at the one-bedrooms for $1,500, those rents are continuing to go up.”

Market-rate development has outstripped the supply of affordable units. And “regressive” zoning and environmental regulations, combined with California’s reputation as a tech behemoth are leading to the “hollowing out of the middle class,” Shulman said.

“President Trump wants to keep people out by building a wall. California is more sophisticated – it uses zoning and development laws to keep people out, but they have the same effect,” he said.

State lawmakers have promised to act.

“By not building enough housing, we are driving up evictions and homelessness, pushing people out of our state and jeopardizing the success of young people,” said state Sen. Scott Wiener, D-San Francisco in a recent statement as Senate took up a range of bills aimed at boosting supply and streamlining construction of affordable housing.

But state lawmakers and Gov. Jerry Brown are at impasse over how to help.

The Legislature reached a budget deal last week that included no new money for affordable housing.

Brown last year proposed setting aside $400 million in one-time money, but wanted a set of regulatory changes in exchange that ran into resistance from lawmakers. He says says it takes too long and it’s too expensive to get affordable housing built.

The Democratic governor wants to streamline housing development by limiting environmental project reviews, lowering permit requirements that can drive up per-unit costs, providing financial incentives to cities and counties that build new housing and strengthening laws that require low-income set-asides in new construction.

Environmental groups and unions, however, raised objections.

Now, a series of bills in the Legislature that would establish an ongoing source of funding for housing and ease the permitting process for new construction appears headed for a high-stakes legislative test in coming months. Brown is again saying any deal must include the changes he is seeking.

The governor and lawmakers have other politically difficult issues coming up than may derail a housing deal.

Brown is pushing to extend the state’s cap-and-trade program beyond 2020 to generate money for high-speed rail. It requires a two-thirds vote in both houses of the Legislature and is under fire by business groups that consider the rule requiring companies to buy permits to release greenhouse gases an unconstitutional tax.

Democrats, reluctant to pass new fees or taxes following their April vote to raise state gas taxes, acknowledge financial proposals for housing, also requiring a two-thirds vote, could be challenging.

“I’d love to get something done before the end of the year,” Assembly Speaker Anthony Rendon said in an interview. “It may be tricky.”

Housing advocates and tenants’ rights groups say the governor and state lawmakers are ignoring one of the biggest problems in California.

“It’s shameful that they’re headed on summer recess without doing anything to address what has turned from a crisis to a housing catastrophe,” said Ray Pearl, executive director of the California Housing Consortium, an advocacy group and sponsor of several housing bills this session. “What the Legislature continues to do is talk instead of act.”

Housing advocates are pushing for passage of two funding bills. Senate Bill 2 from Sen. Toni Atkins, D-San Diego, would add a $75 fee on real estate transactions and generate up to $300 million per year for housing. It’s opposed by taxpayer advocates including the Howard Jarvis Taxpayers Association.

“Yes it’s a fee so it takes a two-thirds vote, but I’m optimistic that we can get this one done,” Atkins said. “We’ve been working on it as part of a broader package.”

Assembly Bill 71 from Assemblyman David Chiu, D-San Francisco, would also raise $300 million a year by eliminating the mortgage interest deduction for second homes. It’s opposed by the powerful California Association of Realtors.

Other measures seek to accomplish Brown’s goals. Weiner’s Senate Bill 35 would streamline the approval process for affordable housing projects. Chiu’s Assembly Bill 73 would ease zoning and environmental review rules.

“We’ve been having a lot of conversations (about a housing package),” Chiu said. “We need to establish a permanent source of funding, streamlining housing creation and hold cities accountable to actually building it.”

Lisa Hershey of the advocacy group Housing California said she’s hearing pushback over whether lawmakers will act on housing this year given the upcoming cap-and-trade issue and the fact that Democrats already have voted to raise fuel taxes.

“The Democratic caucus really put their necks out there because it’s a tax, so they have been reticent to push for anything going forward that is a tax or a fee,” Hershey said.

She said she’s not optimistic if no action is taken, because next year is an election year.

The state’s housing shortage, coupled with rising demand, has led to widespread evictions and massive rent increases across California.

It’s forcing people like Nancy Avalos, a Sacramento mother-of-three, out of their homes.

“I don’t earn enough to stay here,” Avalos said last week as she spread out paperwork on her kitchen table that showed her rent was recently increased from roughly $800 per month to nearly $1,025.

Avalos is a member of the group Alliance of Californians for Community Empowerment, created this year to organize tenants around housing issues. She’s pushing for measures like rent control to rein in skyrocketing rents. For now, she’s moving to a duplex in Sacramento, where she plans to rent a single room for herself and her three kids.

“There’s no other choice,” Avalos said. “It’s really hard because my kids have to leave their school.”

Editor’s note: This story was updated at 9:15 a.m. June 21, 2017 to correct the amount of Nancy Avalos’ current rent from $1,200 to 1,025.

Angela Hart: 916-326-5528, @ahartreports

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