It’s baffling and infuriating watching people get excited about truly lame housing policies. From healthcare to climate change, the political ground seems to be shifting left. But for some reason, when it comes to housing, we remain stuck in the free-market Reagan era.
Most recently, California’s new Governor, Gavin Newsom, is being roundly praised for a few proposals included in his draft budget, unveiled the other day, that are meant to address the state’s housing crisis.
Liam Dillon, who covers housing politics for the LA Times, called one of Newsom’s ideas a “radical new step.” Matt Schwartz, who runs a nonprofit called the California Housing Partnership, applauded Newsom for his “bold visionary leadership.” Noah Smith, a proud YIMBY and Bloomberg columnist, on Twitter said “Newsom is turning out to be amazing.”
Newsom himself said “we’re not playing small ball on housing.” The same guy who refused to support Prop 10 is branding himself a hero.
What is everyone so excited about?
First, the proposal generating the most buzz is Newsom’s idea to withhold state transportation funding from local governments that don’t plan for enough housing construction according to the “Regional Housing Needs Allocation” (RHNA), which comes from a law from the 1960s signed by Governor Ronald Reagan. It’s the type of wonky stuff that liberals absolutely love.
Basically, every 8-ish years, the California Department of Housing and Community Development (HCD) looks at population trends and assigns each region of the state a number of housing units they should construct, divided by income level. Regional agencies — like the Southern California Association of Governments (SCAG) and the Association of Bay Area Governments (ABAG) — then assign these goals to each city. Cities are supposed to plan and approve permits for enough developments to reach these goals.
But this program has no teeth, so Newsom wants to incentivize cities to actually meet these numbers by threatening access to state funding. It’s better than the current situation, but I wouldn’t ever call it “radical.”
The thing is, these formulas suck. More specifically, they prioritize market-rate construction.
LA County from 2014–2021 is supposed to plan for 73,000 low-income units and 76,000 above-moderate-income units. The Bay Area is also meant to construct more housing for the rich than the poor: 79,000 units versus 76,000, respectively. This is despite HCD’s own numbers showing that there’s a massive shortage statewide of affordable housing, alongside a surplus of 300,000 above-moderate-income units (page 28).
This isn’t exactly surprising once we understand that HCD is run by a bunch of professionals who have way too much faith in capitalism. In a 60-page report from 2017 analyzing California’s housing crisis and proposing ideas to fix it, rent control wasn’t even mentioned once. Gotta love the experts!
Newsom says he wants to revise the formulas that set these housing goals, but there’s no indication that he’s focusing on providing more low-income housing. Rather, he says the plans will be “more realistic, and more nuanced.”
The other problem is that urban centers where the crisis is the worst, like LA and San Francisco, are already going way beyond their market-rate numbers! What they’re not doing is building enough units truly affordable for low-income people — and for that we need public money, as the private market will never build for poor people, because it’s not profitable.
So this is the second part of Newsom’s proposal that people are excited about: $2.3 billion for housing and homelessness, and potentially an additional $500 million if he can convince Silicon Valley tech leaders (not his words) to support his efforts.
This is a tiny amount of money, considering how deep the crisis is, and especially considering that 144 billionaires in California are sitting on a collective total of $720 billion of wealth. But Newsom, like all other California Democrats, refuses to even talk about taxing the rich.
The California Housing Partnership (whose President is quoted above lauding Newsom) estimates that Los Angeles County alone has a shortfall of 550,000 affordable homes. Using an extremely conservative estimate that it costs $200,000 to construct each unit of affordable housing — researchers at UC Berkeley estimate it costs $425,000 per unit — then LA County would need $110 billion to meet the needs of low-income renters! (Obviously, this is a very rough calculation.)
So Gavin Newsom is being applauded for proposing 1/50th of the amount needed to provide housing for low-income renters in LA alone. So much for his “Marshall Plan for affordable housing.”
California will never house everyone with dignity until we challenge capitalism and seriously redistribute wealth. Stop applauding mediocrity!