Influencers Opinion

California is experiencing a housing shortage. Why are permits down 20 percent?

Note to readers: Each week through November 2019, a selection of our 101 California Influencers answers a question that is critical to California’s future. Topics include education, healthcare, environment, housing and economic growth.

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This was going to be the year that California’s political leaders fought and won the war against the skyrocketing cost of unaffordable housing. They promised to do everything possible to build more homes and bring down the state’s mind-numbing housing prices. But new data from the respected Construction Industry Research Board illustrates the scope of that challenge: in the first six months of 2019, there was almost a 20 percent decrease in housing permits statewide compared to the same time period last year.

“We’re still going in the wrong direction,” said Dan Dunmoyer, California Building Industry Association president.. “Notwithstanding the near universal opinion that California is in a housing crisis, and our homeless population is skyrocketing, it is getting harder everyday to build homes in California.”

Carl Guardino, president of the Silicon Valley Leadership Group, acknowledged that this is a problem that has festered over many years and can’t be fixed overnight. But he also warned that voters are impatient for solutions.

“Whenever we talk about the need for more homes for hard-working California families, we must never forget the… three-decade drought in building the annual number of homes needed to keep up with our population growth,” Guardino said. “While California residents… list the lack of homes affordable to people of all incomes as our state’s number one need, it is still difficult politically for elected leaders at the state and local levels to build on that firm foundation of voter support.”

Several of McClatchy’s California influencers proposed an enhanced role for the public sector to bolster housing starts.

“The slowing of private sector construction activity is a reflection of the waning economic cycle. It demonstrates that the public sector needs to be more proactive in funding and building the kind of housing that working families need,” said Cesar Diaz, legislative and political director for the State Building and Construction Trades Council of California. “Public sector construction activity is a proven tool for economic growth. If we can build dams, bridges and power plants, there is no reason why we cannot build more homes.”

But even more Influencers focused on dramatic increases in development fees charged by local governments for housing construction, putting the cost of homes even further out of reach of many Californians.

“Because of how significantly these fees affect overall project costs, these fees are often passed along to buyers in the form of higher home prices, especially in high demand markets,” said Jennifer Svec of the California Association of Realtors. “Until our state leaders get a handle on… pre-development costs, future generations of Californians will continue to suffer and homeownership rates will continue to decline.”

Tia Boatman Patterson, Gov. Gavin Newsom’s senior housing adviser, cited a range of causes for the construction shortfall, but reiterated the governor’s belief in the need for an enhanced role for state government.

“There are structural barriers to production, many of which are at the local level where the final housing construction decisions are made,” said Patterson, who pointed to increased funding for local housing projects in Newsom’s budget, while also reinforcing the governor’s carrot-and-stick approach. “Meanwhile, our Governor and State legislators have worked to strengthen the consequences for those jurisdictions that continually refuse to even plan for enough housing.”

But San Bernardino County Supervisor Janice Rutherford argued development fees were often a result of a lack of state financial support.

“Cities have been left to figure out how to fund parks, recreation, public safety, and other needs on their own,” said Rutherford, who also called for comprehensive reform of the California Environmental Quality Act (CEQA). “This has led to the fees and regulations that are now strangling the housing sector.”

California Business Roundtable President Rob Lapsley disagreed.

“Excessive development fees are a hidden tax that are decreasing new housing starts while driving up the costs,” Lapsley said. “As cities and local governments continue to increase spending on their expanded programs and employee costs, California families should not have to pay the price just for a place to live.”

Former Anaheim Mayor Curt Pringle criticized the “cost of uncertainty,” suggesting an unpredictable approval process was an even greater deterrent for builders than fees and regulations.

“The time it takes to secure land, jump through the regulatory hurdles and get development approvals make many developers pause with concern – thus housing starts will slow,” Pringle said. “Cities and school districts should defer development fees… until each housing unit is sold or occupied, taking away a large upfront cost and reducing development risk.”

Dan Schnur, a veteran analyst and longtime participant in California politics, is director of the California Influencers series for McClatchy.
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