The California Dream is in jeopardy.
The state continues to be blessed with some of the most creative and innovative companies in the world, with an economy that would rank as the fifth-largest among the nations of the world.
Yet there is nothing inevitable about retaining this leading economic position. The challenges the state faces today are daunting, and one of the most significant hurdles is housing availability and affordability.
The American economy is built upon the premise that long-term economic growth can be sustained year-over-year, with corresponding job creation and rising incomes. For companies to grow, workers must be able to afford to live within a reasonable commuting distance from jobs. If people could not afford the cost of living, then they will seek to relocate to a more affordable area. Companies would likewise be forced to move in order to control costs and retain a workforce.
Currently the U.S. is seven million units short of building enough housing to keep up with demand. Roughly half of that shortage is in California. This lack of supply creates an imbalance in the market that pushes housing costs ever higher.
The lack of housing across the spectrum has increased homelessness over the past decade.
This housing crisis is part of the larger societal challenge of stagnation. As America transitioned to an Information Age economy, many of our laws and regulations have failed to progress. As a result, outdated and unnecessary roadblocks provide obstacles that impede even the seemingly easiest housing projects. The average multifamily development (over 50 units) takes approximately five to seven years from conception, through governmental approvals, to completion. Many times, projects with broad-based community support are still delayed indefinitely due to the misuse of the California Environmental Quality Act (CEQA). Originally signed into law by Governor Ronald Reagan as a tool for community review of project environmental impacts, it is now utilized by many to stop any kind of development.
To solve the housing crisis and provide for more affordable housing, supply and demand must be brought into balance.
Local, state, and federal government leaders will need to take major steps to increase the supply of market-rate and affordable housing.
The legislature must introduce CEQA reform to streamline project approval timelines. The legislature also should take the lead on sweeping solutions such as the Commonwealth of Massachusetts Comprehensive Permit Act, where Massachusetts law overrides local zoning to allow greater density for projects which provide at least 25% affordable housing.
California State Senator Scott Wiener, a Democrat from the Bay Area, has shown leadership by sponsoring SB 827, which would be a similarly comprehensive approach that would increase housing density next to transit lines. Unfortunately, the bill did not make it out of committee.
U.S. Senator Kamala Harris last week showed an increased federal focus on housing policy by unveiling the Rent Relief Act, a new piece of legislation that would give at least 13.3 million families – including many middle-class households –tax credits to subsidize their rents. If passed, the tax credit would be available to those who make less than $100,000 a year and spend at least 30 percent of their income on rent, including utilities. With this legislation, Senator Harris has shown a keen sensitivity to the daily realities of coastal urban living, where a majority of citizens and particularly millennials are likely to be renters and not homeowners.
Local, state, and federal elected officials must continue to invest in the California Dream, with a focus on the next generation. While nothing will fully relieve the housing crisis like building enough housing units to keep up with demand, a middle-class rental housing tax credit is a positive first step in relieving some of the pressures that many Californians feel.
Perry Pound serves as managing director of development for Greystar Real Estate Partners with responsibility for Southern California.
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