Recent reports by USC researchers and market analysts suggest that California’s already pricey housing stock requires far more than an interest rate cut to balance out, meaning an onrush of moderately priced units aren’t likely in the near term.
But there has been further legislation from Sacramento this past session that seeks faster production of reasonably priced units.
Senate Bill 450, from Sen. Toni Atkins, D-San Diego, and signed by Gov. Gavin Newsom last month, wants to speed up approvals for higher-density projects on single-family lots. If a local agency fails to act on a duplex or lot split application within 60 days, the application is deemed approved.
The law seeks to expand provisions enacted three years ago under S.B. 9, which included measures to potentially create 6-million units, but through 2022 had helped produce only a few hundred, according to legislative analysts.
A statewide group representing local jurisdictions still registered opposition to S.B. 450, arguing in the Aug. 29 Senate Analysis, that it piles on the phalanx of state laws that can require automatic approval from local agencies but without enough money for it: “According to the League of California Cities, ‘The California Legislature continues to pass, and the governor sign dozens of complex housing laws requiring ministerial approval of various projects without funding local governments to hire the necessary staff to implement these laws.’”
State Department of Housing and Community Development (HCD) data shows that California needs to have more than 2 million new homes planned in the next eight years to reverse the housing shortage.
But state mandates are still subject to vehement local opposition, not just at public meetings and more often in the courts. The state, for example, is appealing a Los Angeles County court ruling that exempted five cities from state housing laws.
Other housing-strapped areas are seeking a different path. Roughly 50 communities in California are now Prohousing Designated Jurisdictions, and eligible for Pro-housing Incentive Program (PIP) funding, but it’s far from clear how long it could be for shovels to break ground.
Where to site new housing is always contentious. For example, in Berkeley (a PIP grant recipient) opponents have pointed out fire risks if building higher density structures in Berkeley Hills, although three high-rises are proposed closer to campus.
Nearby, Richmond is working to further development of public lands as part of the recently amended Surplus Land Act of 1968. “Underutilized public land represents a critical opportunity for innovative housing projects that emphasize community control and shared equity not only for Richmond, but across the Bay Area,” according to a public-private partnership launched in 2019 to help residents remain in their homes while still producing moderate-cost options to meet community needs.
In California, while lower interest rates can positively impact multifamily construction, they represent just one piece of a much larger puzzle that developers must navigate, Dan Dunmoyer, president of the California Building Industry Association, told the Free Cities Center by email.
“Key considerations include financing options, environmental regulations, infrastructure challenges, high construction costs, market demand, and long-term demographic trends,” he said. “These interconnected factors create a complex landscape for multifamily development, making the process lengthy and often frustrating for developers. Additionally, many local governments prioritize single-family housing or specific types of developments over multifamily units, complicating the approval process further.”
ADUs (Accessory Dwelling Units) are just one key aspect of zoning reform. Sacramento on Sept. 10 became the first city in the state allowing multifamily housing in every neighborhood. The Missing Middle Housing (MMH) Ordinance takes effect Oct. 17.
“This sets Sacramento apart from so many other cities in the country in terms of encouraging more housing and innovative types of housing in traditionally single-family neighborhoods,” Mayor Darrell Steinberg said on the Sacramento City Express government website.
While court rulings have stymied multifamily construction in several cities, a trade journal analysis also shows housing permits increasing in the Riverside/San Bernadino/Ontario metro, but more for single-family than multiunit developments.
Meanwhile, burdensome impact fees atop other regulations and insurance costs have grown alongside California’s housing deficit.
“It’s estimated that 10,000 to 15,000 shovel-ready condos are going unbuilt this year due to builders and potential buyers struggling to find affordable insurance,” Dunmoyer added. “If insurance cannot be secured for properties – especially in high-risk areas or for multifamily homes – mortgage companies will refuse to lend. This creates a significant barrier: if potential buyers cannot obtain homeowners insurance, builders cannot sell their product, exacerbating California’s housing shortage even further.”
Other western metros, including Salt Lake City, are seeking ways to get more affordable housing into urban areas. After finding a way to approve multifamily buildings throughout the city, the downtown has also seen strides in office-to-residential conversion. Boise has also approved a revamp of its 60-year-old zoning code to include ADUs.
Dunmoyer noted other effective reforms can include higher density housing near transit hubs and reducing minimum parking requirements: “A less regulated environment could allow builders to respond more quickly to housing shortages, especially in high-demand areas.” In California, “the process can take anywhere from several months to several years to navigate permitting and construction phases.”
California has also just passed revisions to the Builder’s Remedy law, with Assembly Bill 1893. While it no longer allows developers to build unlimited density in cities that don’t meet state-mandated Housing Element rules, it lessens how many affordable units a project must include, and in smaller buildings, none are required.
Yet even as the state is making it much harder for local governments to say no to new housing – with more than 100 laws in recent years and hopes that more innovation creates better futures for new and longtime residents – some regulations have long frustrated efficient housing growth.
But changes to the California Environmental Quality Act (CEQA) have helped. A mixed-use Costco and apartment complex in Baldwin Hills/Crenshaw in Los Angeles just broke ground, and roughly 25% of the units are slated for affordable housing.
“The need for housing goes beyond individual well-being; it is critical for economic stability, social equity, community development, and public health,” Dunmoyer concluded. “Meeting housing needs is vital for creating resilient and thriving communities.”
Sarah Downey is a journalist who covers political and social policy. She’s reported for Newsweek, the Chicago Tribune, and Boston Globe in the United States and overseas.
